Kuglin Trial 2, Form #09.040

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Table of Contents
Can One Citizen Make A Difference ................................... 004
The Citizen Has the Right to Ask Questions .......................... 006
Proof of Conspiracy ...................................................... 007
Richard Simkanin Mistrial ............................................... 011
US v. Kuglin, Volume II Transcript .................................... 013
US v. Kuglin, Volume III ................................................ 076
US v. Kuglin, Volume IV ................................................ 125
Federal Rules of Evidence, Rule 803 .................................. 151
26 CFR 1. 0-1 ............................................................. 156
Cole v. Macfarland ....................................................... 159
IRC of 1973, Section 7201 .............................................. 163
IRC of 1991 ............................................................... 172
IRC of 2002, Section 7201 .............................................. 173
IRC of 2002, Section 6001 .............................................. 17 6
IRC of 2002, Section 6011 .............................................. 17 6
IRC of2002, Section 6012 .............................................. 178
Parallel Table of Authorities ............................................ 182
RIA Regulations, Volume 5 ............................................. 186
Disclosure, Privacy Act, and Paperwork

Reduction Act Notice ..................................................... 189
Federal Rules of Evidence ............................................... 190
1040 Tax Return 2000 ................................................... 191
26 USC, Section 1461 ................................................... 193
United States Codes Congressional and
Administrative News, 1980
"Paperwork Reduction Act" ............................................. 194
Paperwork Reduction Act Submission ................................. 197
26 CFR, Section 602OMB .............................................. 204
IRS Form 2555 ............................................................ 210
1962, 1040 .................................................................. 217
1971 Instructions for Form 1040 ....................................... 218
1979 Annual Report ...................................................... 219
1994,26 CFR 602.101 OMB ............................................ 221
TD 2313 .................................................................... 222
Internal Revenue Investigation, 1953 .................................. 225
Internal Revenue Bulletin, 1986 ........................................ 228
Federal Register 1974 .................................................... 229
Dept. of Treasury, 1983 .................................................. 23 0
Handbook for Special Agents ........................................... 231
Library of Congress ...................................................... 233
Can one Citizen Make a Difference

Citizens have the right to write letters, attend hearings, obtain
documents, using the Freedom of Information Act, do research and
ask specific questions of government officials.
You have the ability to bring about change by exposing the truth
with the facts and bringing it to the attention of others.
Information is power as you persistently ask unpopular but entirely
reasonable questions about matters affecting your daily life, which
has and will continue to bring about change. The IRS code is a
toxic dump of carcinogenic codes that incinerate citizens with all
its double speak.
Congressmen don't understand the code, Judges don't understand
the code, Prosecutors don't understand the code, IRS agents don't
understand the code, tax attorneys, CPA's don't understand the
code so how can a citizen understand the code?
The big question is "Does the IRS code pertain to the average state
citizen?" From coast to coast citizens are having increasing
success in their battles with an unresponsive IRS. By blending
activism with specialized investigating, citizens are discovering
that they are not so easily thwarted by those in power.
In a recent poll by CNN, it reveled that 75 percent of Americans
didn't believe the "Warren Commission Report" that Lee Harvey
Oswald was the only man that shot President Kennedy. 65 percent
of Americans don't trust the Federal Government.
A growing number of citizens who have felt dis-empowered and

disenfranchised are taking matters into their own hands with many
giving up on capital politics. Without even realizing it, citizens are
learning how to become increasingly proficient in investigating,
searching, scrutinizing, following paper trails, and unearthing
background information, with ultimately informing their family
members, friends, and the general public with their findings.
Citizen activists have unearthed documents that prove many of
their suspicions that politically connected domestic and European
bankers received sweetheart deals in helping to formulate and pass
the 1913 tax code, the 17th amendment, and the Federal Reserve
Act of December 23, 1913. Citizens are trying to do a very novel
thing in holding IRS personnel "accountable" for their actions.
One of these brave and daring citizens is Vernice Kuglin. She has
inspired thousands with her daring and brave actions in holding
fast to her beliefs and commitment to the truth. We also can't say
enough for those twelve brave jurors who rejected the government
argument. They saw through the smoke screen and realized that
the government did everything but prove Vernice Kuglin liable for
a tax. We all owe Vern ice Kuglin a debt of gratitude for her
courage.
As you read and study her transcript don't forget all the time and
effort she spent studying to enable her to take the stance she took.
May we all become as resilient as Vernice Kuglin.
In reading the transcript of the V emice

Kuglin trial, case number 03-20111-MI, IN
THE UNITED STATES DISTRICT
COURT FOR THE WESTERN DISTRICT
OF TENNESSEE WESTERN DIVISION,
UNITED STATES OF AMERICA, Plaintiff
vs. VERNICE KUGLIN Defendant, it was
made very clear by both Judge JON
PHILLIPS MCCALLA who was the
presiding Judge over the trial and UNITED
STATES ATTORNEY JOSEPH MURPHY,
ESQ. who was the lead prosecutor of the
case, that the citizen is presumed not to
know the law. The citizen has the right to
ask questions or ask for information about
the law and refer those questions to those
whose fiduciary duty is to uphold the law.
The citizen then has a right to have his or
her request or question answered in a
reasonable amount of time by someone in
Authority that has a fiduciary duty to know
the law.
FEDERAL INCOME TAX ... PROOF OF CONSPIRACY
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FEDERAL INCOME TAX

PROOF OF CONSPIRACY
By: Alan Stang
For many weeks, we have been looking at what we realistically might do to save our
country from the totalitarian dictatorship that is rapidly suppressing it. We have seen that to
have any hope of doing so we must recognize the cause: the conspiracy for world
government. Presently, we are demonstrating why that recognition is so important, and we
chose an issue for the purpose: the sodomite explosion.
We chose that issue because it is so much in the news. We could just as well have chosen
the federal income tax. A few days ago, the income tax was in the news again, or, rather, it
should have been. It should have been banner headlines across the country - but it wasn't.
Because you are reading these profundities at Etherzone.com, you probably already know
what I am talking about, but my guess is that few other Americans do, because it goes
without saying that the Communist News Network, the Communist Broadcasting System,
all the news that's print to fit and so on, have not given it the coverage it deserves.
I refer of course to the fact that, in Memphis, the federal
government tried a lady named Vernice Kuglin on charges of tax
evasion - filing false W-4 forms - and lost. Miss Kuglin is a pilot for
Federal Express. Some years ago, she began wondering what law
required her to pay income tax. She couldn't find it in the Internal
Revenue Code, so, in 1995, she wrote IRS and asked them to tell
her.
The Internal Revenue Service refused. They did not respond. The
more she studied, the more she became convinced that the reason
they failed to respond was that the law did not require her to pay.
So, she put 99 allowances on her W-4, and took home (almost) all
her wages.
Our friends at IRS said she had lied, and charged her with six
felony counts of tax evasion on $920,000 of income, enough to put
Miss Kuglin away for as long as 30 years. She is 58 now, so in
effect she faced a life sentence, and could have had to pay $1.5
million in fines. It is important to note that our friends at IRS
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10/27/2003
prepare these cases very carefully. They don't take one into court
unless they know they will win. In a case like this, involving serious
money, they do everything they can to incite the jurors' envy. They
constantly refer to the defendant's "fair share."
On August 8, 2003, in Memphis, despite all this, the jury acquitted
Miss Kuglin of all charges. They said IRS had not proved the lady
was required to pay the tax. After the verdict, frustrated prosecutor
Joe Murphy asked the judge to order Miss Kuglin to pay it. The
judge replied, "Sir, I don't work for IRS." By then Murphy may have
been too mentally taxed to remember that, after the verdict, there
was no legal basis for the judge to issue such an order, even if he
does work for IRS.
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Notice that there are many taxes in the Internal Revenue Code.
Our friends at IRS have no trouble citing the Code section- the law
-that requires a "taxpayer" to pay each one. Except the income
tax. With regard to the income tax alone, they are tongue-tied.
Why? Wouldn't they quash the controversy and kamikaze pilots
like Miss Kuglin, simply by stating the Code section that applies?
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Yes, they would; they don't 'cause there ain't. There is no such
section. That doesn't mean the income tax is illegal or
unconstitutional. It doesn't mean there is no such tax. There is, and
the people it applies to need to pay it, but it applies to very few
people, like most of the taxes in the Internal Revenue Code.
What the law requires you to do every year- and our friends at IRS
say so themselves - is determine whether you are one of those
people. You alone know that, because you alone know what you
did last year. Did you make and sell liquor last year? Then you
must pay the liquor tax. If you made and sold no liquor, forget it.
You don't owe the tax.
To conceal that fact, litigious prevaricators (lawyers) with advanced degrees in obfuscation
have deliberately written the income tax into the Code in as confusing a manner as
possible, to make it incomprehensible to the normal mind; and our dear friends at IRS use
the uncertainty that confusion engenders to intimidate and literally to threaten Americans
into voluntarily paying a tax the law does not require them to pay.
What does the law say? There are two kinds of federal taxes, only two: direct and indirect.
There is no third kind of federal tax. The law - the Constitution - says that all federal taxes
must be one or the other. In Brushaber v. Union Pacific (240 US 1), in 1915, the US
Supreme Court ruled that the income tax is legal (constitutional), but that it is an indirect
tax.
Indeed, in Stanton v. Baltic Mining (240 US 1 03), just a year later, the same judges said the
same thing and added that their previous ruling, in Brushaber, created "no new power of
taxation." In other words, Brushaber limited the federal government's power to tax rather
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10/27/2003
Page 3 of 4
than expand it; limited it by forcefully explaining where that power could not reach. Nothing
had changed since the Court ruled the income tax unconstitutional in 1894, in Pollock v.
Farmers' Loan & Trust (158 US 601 ).
The trouble with the tax today is that our friends at IRS are administering it illegally as a
direct tax, which the Supreme Court forbade. That is the secret they don't want you to
know. Because I am trying to inform, not obfuscate, I am happy to add that this explanation
is necessarily quite simplified, maybe even oversimplified, because of space - but it is true.
For more information, one of many things you could look at is my book, TaxScam: How IRS
Swindles You and-What You Can Do About It, which your Intrepid Correspondent wrote as
a guest of the federal government, all expenses paid, without the help of Matthew Lesko.
Go to www.stangbooks.com and click on non-fiction.
Patriotic Americans hearing about all this for the first time, often worry. Without the income
tax, would the government collapse? The answer is to ask yourself when the government
began. Let's say 1784. When did the income tax begin? Nineteen thirteen. Between 1784
and 1913, there were 129 years. For many of those years, there were no internal taxes at
all! Yet, just before the illegal income tax of 1894, the big problem in Congress was the
"Surplus Monster." Tax money was pouring in and Congress didn't know what to do with it.
See the cartoon from Puck, the comic weekly, in TaxScam.
Indeed, when income tax withholding took effect "temporarily" in 1942, the federal
government was still collecting more in alcohol and tobacco taxes than it was in individual
income taxes. Can you name a year between 1784 and 1942 when the government
collapsed? I'm willing to compromise. Name a couple of months. No income tax was
needed, because during most of those years the government was restricted to the few
activities the Constitution allows.
Because of verdicts like Kuglin, pressure to abolish the income tax will grow. Legislators
and others will devise schemes like sales taxes, guaranteed to produce the same revenue
the income tax yields now. Ask yourself why the federal government should continue to
receive the enormous swag it gouges from us now.
Along these lines, where did the income tax come from? Isn't it the second step to
Communism listed by Marx in the Communist Manifesto? Marx thought that the only step to
Communism more important than the income tax was government control of "all property in
land." Sure enough, we now can see why he thought the income tax was so crucial to
Communism.
Among its purposes is the destruction of the middle class that pays it. As you will see in
TaxScam from the mouth of the Conspiracy itself, the main purpose of the income tax is to
reduce the destructive, inflationary effects of the funny money printed by the Federal
Reserve. The income tax does that by removing purchasing power from the economy, via
"temporary" withholding.
So now we know that the income tax didn't "just happen." It isn't just a scheme to raise
funds. It's a tool of the conspiracy for world government. Did you know all this before? If not,
and if you now have a totally different take on the income tax, you now also see why it is
10/27/2003
Page 4 of 4
supremely important to call it what it is: a conspiracy.

We are talking about what we can realistically do to save America. When your obedient
servant went nose to nose with IRS, I was charged only with a few misdemeanors, failing to
file a particular form; no big deal. Miss Kuglin laid her life on the line. She faced 30 (thirty)
years in prison, plus a huge fine. Apparently she refused to take a lesser plea.
I have not yet had the honor and pleasure of meeting the lady. I am sure she is as feminine
as a lady can be. So I am not talking about her when I say that to do what she did would
take cojones as big as bowling balls, and I don't know many men that brave. I certainly
have nothing against Jessica Lynch. That innocent, little lady was used and abused by Iraq
and the United States, which to its everlasting shame is promoting women in combat. But
kamikaze pilot Vernice Kuglin is in fact the heroine the media have been trying to make
poor Jessica. Banzat1
Related Articles:
Degenerate America- The Sodomite Plan (I)
Degenerate America- The Sodomite Plan (II)
Sodomite Steamroller Buggers Again - The Conspiracy Unfolds
"Published originally at EtherZone.com : republication allowed with this notice and hyperlink
intact."
Alan Stang has been a network radio talk show host and was one of Mike Wallace's first
writers. He was a senior writer for American Opinion magazine and has lectured around
the world for more than 30 years. He is also the author of ten books, including, most
recently, Perestroika Sunset, surrounding our Government's deception in the POW/MIA
arena. If you would like him to address your group, please email what you have in mind. He
is a regular columnist for Ether Zone.
Alan Stang can be reached at: feedback@stangbooks.com
We invite you to visit his website at: www.stangbooks.com
Published in the August 15, 2003 issue of Ether Zone.
Copyright 1997 - 2003 Ether Zone.
We invite your comments on this article in our forum!
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10/27/2003
___ Message: 8 Date: Tue, 25 Nov 2003 22:04:12-0600

Subject: Mistrial of Simkanin 11-26-03 Employer
Simkanin Prosecution Ends in Mistrial Judge Stymies Both Jury & Defense DOJ
Intends to Retry Simkanin ASAP Jury Hung at 11-1 Favoring Acquittal After
almost 6 months of incarceration in isolation awaiting his federal trial, nonwithholding employer Dick Simkanin's trial ended this evening in a mistrial after
the jury was unable to reach a verdict on federal charges that Simkanin failed to
Withhold taxes from his employees. Simkanin, a successful Bedford, Texas
business owner, had been charged with 12 counts of Willful Failure to Withhold
employment taxes for his employees and 15 counts of filing False Claims for
requesting refunds of tax pre-payments that had been made by Simkanin on behalf
of those employees. Facing years in federal prison, his trial lasted only hours,
beginning and ending yesterday - largely because the Court denied Simkanin the
opportunity present any expert defense witnesses or legal evidence regarding the
contested legal obligations under US income tax statutes. Jury deliberations started
this morning and the mistrial was declared around 6 PM Central time. A report
from several sources close to the Simkanin team was that the jury hung 11-1 in
favor of acquittal. US Attorney Jarvis stated that he intended to retry Simkanin "as
soon as possible." Simkanin, who has NO criminal record, was immediately
ordered back into federal custody by Judge John McBryde. Reportedly
contributing to the jury's inability to reach a verdict were nine separate requests
and questions from the jury including a request to see a written copy of the jury
instructions, a request to see a copy of the Internal Revenue Code and for the judge
to provide a copy of the specific US statute that required Simkanin to withhold.
Judge McBryde refused these significant requests. According to court observers,
Judge McBryde also significantly impaired and repeatedly interfered with defense
counsel Arch McColl's cross examination of government witnesses. One example
of how Judge McBryde dispensed justice during the short trial occurred following
the testimony of one of the IRS expert witnesses who testified that the definition of
"employee" that applied to Simkanin as an "employer" was found at Internal
Revenue Code Section 3401 (which is for legal definitions), and defines
"employee" as: "For purposes of this chapter, the term "employee" includes an
officer, employee, or elected official of the United States, a State, or any political
subdivision thereof, or the District of Columbia, or any agency or instrumentality
of any one of the foregoing. The term "employee" also includes an officer of a
corporation." During a break, Judge McBryde requested US Attorney Jarvis for the
legal definition of "employee" to include in the jury instructions. Defense attorney
11
McColl then attempted to show the judge the definition in the IRC at section 26
USC 3401 that had just been testified to by the IRS witness. According to court
observers, the judge dismissively "waved off' McColl with a flip of the wrist and a
comment, "I know what your position is Mr. McColl, and I disagree. That is not a
definition. It says 'includes' not 'defines'. I want Mr. Jarvis' position." According to
courtroom observers, US Attorney Jarvis later recalled the IRS employee to the
witness stand, and the witness subsequently "corrected" his previous testimony to
affirmatively declare that the definition of "employee" which applies to Simkanin
was not from Section 3401, but rather from Section 3121(d). Although the
definition of "employee" found at 3121 is certainly more encompassing than the
legal definition first asserted by the IRS witness, the subsequent definition may
ultimately cause unanticipated problems for the government if it attempts to retry
Simkanin. The following citation is from section Section 3121(e), which, (per the
"corrected" testimony of the IRS witness), also contains legal definitions for the
terms "State" and "United States" for the purposes of the withholding chapter that
Texas resident Simkanin was allegedly charged with violating: (e) State, United
States, and citizen For purposes of this chapter- (1) State The term "State" includes
the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands,
Guam, and American Samoa. (2) United States The term "United States" when
used in a geographical sense includes the Commonwealth of Puerto Rico, the
Virgin Islands, Guam, and American Samoa. An individual who is a citizen of the
Commonwealth of Puerto Rico but not otherwise a citizen of the United States)
shall be considered, for purposes of this section, as a citizen of the United States.
During the two previous years, Simkanin had appeared before two separate federal
grand juries, each apparently refusing to indict him after hearing Simkanin directly
testify about the true legal substance of the US Income Tax Code. At each of these
grand jury proceedings, Simkanin also provided each grand juror with substantial
documentary evidence showing both the constitutional problems with the income
tax system and evidence of how our government has conspired to contain these
truths through deception and abuse of the public trust. According to sources on the
defense team, in early October, Simkanin, believing his trial was being
"railroaded" by the federal prosecutor, acting in collusion with the District court,
plead guilty to a single tax charge. Weeks later, the plea bargain was withdrawn by
the DOJ because of an error in the government's original plea offer. Simkanin,
apparently, reconsidering his earlier decision to plea, decided to go to trial and seek
bona fide justice. Today, he almost got it.
12
228
IN TilE UNITED STATES DISTRICT COURT
APPEARANCES
FOR mE WESTERN DISTRICT OF TENNESSEE

Appearing on behalf of the Plaintiff:
WESTERN DMSION
TERRELL L. HARRIS, ESQ.
UNITED STATES AITORNEY

SUITE 800 FEDERAL BUILDING
167 NORTI! MAIN STREET
MEMPHIS, TENNESSEE 38103
By: JOSEPH MURPHY, ESQ.
UNITED STATES OF AMERICA,

Plaintiff,
VS.
NO. 03-20111-Ml
Appearing on behalf of the Defendant:
VERNICE KUGLIN,
LOWELL H. BECRAFT, JR.

209 LINCOLN STREET
HUNTSVU.LE, ALABAMA 35801
Defendant.
ROBERT G. BERNHOFT, ESQ.

207 EAST BUFFALO STREET
MILWAUKEE, WISCONSIN 53202
TRIAL PROCEEDINGS
BEFORE TilE HONORABLE JON PHIPPS MCCALLA, JUDGE
AUGUST 5, 2003
VOLUME II
BRENDA PARKER
OFFICIAL REPORTER
167 NORTI! MAIN STREET
229
230
WITNESS INDEX
WITNESS
DANIEL JOSEPH HAUGHTON
PAGE LINE
DIRECT EXAMINATION
BYMR.MURPHY: ........................ 339
BY MR. BECRAFT: ....................... 341 13
DIRECT EXAMINATION
BY MR. MURPHY: ........................ 267
REDIRECT EXAMINATION
BY MR. MURPHY: ........................ 343 14
CROSS EXAMINATION
BYMR.BECRAFT: ....................... 282 19
ISABELLE BAKER
DIRECT EXAMINATION
BYMR.MURPHY: ........................ 312 17
BYMR.MURPHY: ........................ 345
KIMBERLY GILLUM
BY MR. BECRAFT: ....................... 348

6
ELIZABETI! EDWARDS
BYMR. MURPHY: ........................ 351

6
CROSS EXAMINATION
BYMR.MURPHY: ........................ 364
CROSS EXAMINATION
DIRECT EXAMINATION
BY MR. BECRAFT: ....................... 367

6
JEANNE GRIFFIS
DIRECT EXAMINATION
CROSS EXAMINATION
BY MR. BECRAFT: ....................... 336
ALEXANDER RIVERA
DIRECT EXAMINATION
KARLENE NUBY
BY MR. MURPHY: ........................ 334
CROSS EXAMINATION
BY MR. BECRAFT: ....................... 358 20
BY MR. BECRAFT: ....................... 330 10
BY MR. MURPHY: ........................ 332
LEPORLEON PRUITT
DIRECT EXAMINATION
DIRECT EXAMINATION
BYMR.MURPHY: ........................ 319
CROSS EXAMINATION
DIRECT EXAMINATION
BYMR.MURPHY: ........................ 316
CROSS EXAMINATION
MARY ANN OSBORNE
BYMR.MURPHY: ........................ 369
231
232
CROSS EXAMINATION
EXHIBIT INDEX
BYMR. BECRAFT: ....................... 371
EXHIBIT NUMBER
PAGE LINE
DAVID SCOBEY
DIRECT EXAMINATION
Exhibit Number I
Notes to Taxpayer- 1996 271
Exhibit Number 2
Cert. of Lack of Record
271 22
CROSS EXAMINATION
Exhibit Number 3
!996IRPTRO
273
BY MR. BECRAFT: ....................... 374 24
Exhibit Number 4
!997IRPTRO
274 10
BY MR. MURPHY: ........................ 373
1998IRPTRO
274 21
Exhibit Number 6
Information Returns
275
Exhibit Number 7
2000IRPTRO
275
18
Exhibit Number 8
2001 IRPTRO
276
Exhibit Number 9
1992 Certificate
277
Exhibit Number 10
1993 Certificate
Exhibit Number 11
1994 Certificate
280 16
Exhibit Number 12
1995 Certificate
282
Exhibit Number 13
IMF Transcript
289
DIRECT EXAMINATION
CROSS EXAMINATION
BY MR. BECRAFT: ....................... 399
BYMR. MURPHY: ........................ 411
VERNICE KUGLIN
DIRECT EXAMINATION
BYMR.BECRAFT: ....................... 419
16
Exhibit Number 5
DEBORAH WHITE
BYMR.MURPHY: ........................ 382
279
Exhibit Number 13
Application
317 12
Exhibit Number 14
W-2s
321
Exhibit Number 15
W-4s
325 24
Exhibit Number 16
FedEx Direct Deposit Entry 8 17
Exhibit Number 17
1995 Form W-4
331 21
Exhibit Number 18
W-2Form
335 22
Exhibit Number 19
Mortgage Interest Summary 41
Exhibit Number 20
Mortgage Interest Payments 7 24
Exhibit Number 21
Statement of Accounts
353 10
234
233
Exhibit Number 22
Application for Account
Exhibit Number 23
Mortgage Documents
365 23
Exhibit Number 24
Loan Documents
370 20
Exhibit Number 25
Chart
384 25
Tuesday, August 5, 2003, at 9:05 o'clock a.m., when and
Exhibit Number 26
Chart
385
where evidence was introduced and proceedings were had as
Exhibit Number 27
Paper Copy of Charts
385
follows:
Exhibit Number A
Docmnent 6209
355
8
TUESDAY MORNING & AFTERNOON
AUGUST 5, 2003
The trial of this case resumed on this date,
308 19
THE COURT: All right We're ready, we'll

bring the jury in.
COURT SECURITY OffiCER: Yes, Your Honor.
(Jury in at 9:05a.m.)
THE COURT: You can be seated. And, of coUISe,

thank you very much. rm sorry we're running a little
late. They came just as I was leaving to do some storm
worlc, so I had to stay a little bit, but we'll try to stay
on schedule.
Ladies and gentlemen, I told you that we would
swear you in this morning, so rm going to have you stand,
all raise your right hand, Mrs. Saba is going to
administer the juror oath at this time.
THE CLERK: Do you and each of you solemnly

swear that you will well and truly try the issues herein
joined and render a true verdict according to the law, so
help you God?
PRELIMINARY lNSlRUCTIONS BY THE COURT

235

236
THE ruRY: I do.
owing to her by the United States of America for said
THE CLERK: You may be seated.
COURT SECURITY OFFICER: You are now the jury
2 calendar y= by failing to make an income tax return on
4 in the case, and rm going to take a few minutes to tell
3 or before Aprill5, 1998, as required by law, to any

4 proper officer of the Internal Revenue Service by failing
5 you about your duties as jurors and give you some
5 to pay the Internal Revenue Service said income tax, and
6 instructions to give you some guidance as to how to listen
6 by filing a fulseForm W-4 in 1997, in violation of Title
7 to the case. Now, at the end of the case, I will give you
7 26, United States Code, Section 720 I. And you'll remember
more detailed instructions, and it is those instructions

9 that you must rely upon in reaching your decision in the
10 of the counts. Count I is just a little differen~ and a
10 case.
II
that Count I is similar to a number of the counts. There

9 are six counts all together. Count 2 is similar to most
This is a criminal case brought by the United
12 States government. The charges against the defendant are

13 contained in the indictment. And we went over the
14 indictment at the very beginning of the case.
rm going
II couple of the counts are different too in they make no
12 reference to the Form W -4.

13
Now, the indictment - an indictment is just
14 for the purpose of presenting information, it's not for
15 to read you Count I of the indictment because it is
15 the purpose of evidence at all.
16 somewhat typical - actually, I'm going to read you - let
16
17 me make sure. 111 read you Count 2. They're all pretty
17 a description of the charge made by the government against
In this case, the indictment is, as usual, just
18 much alike, there's a little bit of difference, and they
18 the defendant and, again, its not evidence of anything.
I 9 do relate to different time periods. Count 2 says that
19 The defendant has pled not guilty to the cbarge
20 during the calendar year 1997, the defendant, V emice B.
20 contained - each charge contained in the indictment and
21 Kuglin, had and received taxable income in the sum of
21 is presumed innocent unless and until the government
22 approximately $147,999.60, that well knowing and believing
22 proves beyond a reasonable doubt that the defendant is
23 the foregoing facts, the defendant on or about April 15,
23 guilty. It will be your duty to decide from the evidence
24 1998, in the Western District of Tennessee, did willfully
24 to be presented whether the defendant is guilty or not
25 attempt to evade and defeat the said income tax due and
25 guilty of the crime charged. You will decide from the

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237
evidence what the facts are, and your verdict will be
circumstances.
2 based on those facts. You are the sole judges of the
3 facts. You must then apply those facts to the law which I
3 be proved, the government must establish beyond a
4 shall give you, and in that way reach your verdict
4 reasonable doubt each of the following elements:
You must follow the law whether you agree with
In order for the crime of income tax evasion to
First, that the defendant owed substantially
6 it or not, and you should not take anything that I may say
6 more federal income tax for the calendar year of which
7 or do during the trial as indicating what I think of the
7 they're charged in that count in the indictment than was
8 evidence or what I think your verdict should be. The law
8 declared due on the income tax return, or if there was no
9 in this case is contained in 26 United States Code,
9 return filed, that it should have been contained in a
10 Section 720 I, and that code section reads in relevant part
10 return filed.
II as follows:
II
12
12 affinnative act constituting tax evasion described in the
Any person who willfully attempts in any manner
Second, that the defendant committed an
13 to evade or defeat any tax imposed by this title or the
13 indictment and that the defendant acted willfully.
14 payment thereof shall be guilty of a crime.
14
15
15 always has to prove in a tax evasion case is that the
The indictment in this case charges that the
Of course, the first thing the government
16 defendant in six separate counts violated from the period
16 defendant owed substantial federnl income tax for the year
17 1996to 2001, Section 7201 of Title 26 of the United
17 that's charged. The government doesn't have to prove the
18 States Code.
18 exact amount the defendant owed, nor does the government
19
19 have to prove all of the tax charged in the indictment or
The tax system or the system of tax collection
20 in the United States relies upon the honesty of taxpayers.
20 if a particular sum charged in the indictment is the
21 The government needs taxpayers to report timely,
21 precise sum. Its not an accounting question, its a
22 completely and honestly all taxes they owe so that it can
22 question of whether or not there was a substantial act.
23 collect the taxes due. Congress, therefore, ha made it a
23 So, of course, one of the things the government genernlly
24 criminal offense for a taxpayer to evade taxes, to file a
24 must prove beyond a reasonable doubt is that the defendant
25 false return or to me no return under certain
25 received substantial income in the year in which the taxes
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239
were due. The government must, of course, establish this
were not paid and that tax was due on that income in the
2 year or the following year which the income was received.
3
In order to prove that the defendant received
4 substantial income which was not included in the return,

the government has to introduce evidence of income and the
6 receipt of that income by the defendant
7
If you find based on all the evidence that the

government established beyond a reasonable doubt the
9 defendant did receive substantial income during the tax
2 type of affirmative element for each of the six counts in

3 the case.
4
Now, the third thing the government has to show
5 is that the defendant acted knowingly and willfully, and

6 ifs in this context that we usually end up with a
7 discussion about whether someone had a good faith belief
8 that they didn't have to pay the taxes. Now, first, they
9 have to show that it was knowing and willfully. The
10 year in question that was not reported in which nothing
10 government has to prove beyond a reasonable doubt that the
II was paid, then the first element of the offense can be
11 defendant knew that she owed substantial federal income
12 established. But, of course, if the government fails to
12 tax for the particular year that is charged that was
13 do that, then on that particular year, the element would
13 declared on any return or returns filed should have been
14 not be established.
14 declared on a return. Whether or not the defendant had
15
The second element that the government must
16 prove as a general proposition is that the defendant -
15 this knowledge is a question offact that will have to be

16 delemlined by you on the basis of all the evidence.
17 and they must prove it beyond a reasonable doubt-
17
18 committed an affumative act constituting tax evasion.
18 it is done purposely and deliberately and not because of
Of course, an act can be done knowingly only if
19 The Internal Revenue Code makes it a crime to attempt in
19 mistake, accident, negligence or other innocent reason.
20 any manner to evade or defeat any income tax imposed by
20
21 the law. There are different ways in which taxes may be
21 on all of this at the end of the case, but I anticipate
22 evaded, and in this case, the defendant - the government
22 that the defendant will take the position that she has a
Now, fll give you more detailed instructions
23 simply charges the defendant received a substantial
23 good faith belief that she did not have to pay or file the
24 income, and then, according to the government, willfully
24 income tax return. She didn't have to pay the taxes in
25 chose not to pay those taxes, knowing that those taxes
25 the respective year.

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241
A defendant does not act willfully, we just
2 talked about the willful element, if she believed in good
Well, thafs a summary of the basic principles

2 of law that you're going to have to be dealing with in
3 faith that her acts complied with the law. Therefore, if
3 this case.
4 the defendant actually believed that she was doing what
5 was in accordance with the tax statutes, she cannot be
5 are going to decide, obviously, and have to decide the
6 said to have the criminal intent to willfully evade taxes.
6 fundamental question of who you believe in this case and
7 Thus, if you find, after you have heard all the evidence
7 who you do not believe, or perhaps more clearly, you're
Let me tell you a couple of other things. You
8 in the case, that the defendant honestly believed that she
8 going to have to decide the fundamental question of
9 owed no taxes, even if that belief was unreasonable or
9 whether you believe the defendant, whether you believe
10 irrational, then you should find her not guilty. However,
10 other proof that would suggest that you do not believe the
II of course, you will be allowed to consider whether the
II defendant had a good faith belief as to her not having to
12 defendant's belief was actually reasonable as a factor in
12 pay taxes under the statutes that govern the payment of
13 deciding whether she held that belief in good faith.
14
It should also be pointed out that neither the
13 taxes. So you're going to have to decide who you believe

14 or who you don't believe in Ibis case. How do you do
15 defendant's disagreement with the law nor her own
15 that? There are a couple of things you try to do,
16 belief-- nor her own belief that the law is
16 basically, usually. First of all, you observe the
17 unconstitutional, if she had that belief, no matter how
17 demeanor of each witness as that witness testifies,
18 eamestly that belief is held, constitutes a defense of
18 determine whether or not you believe what the witness has
19 good faith. It is. of course, the duty of all citizens to
19 to say in this case, determine whether or not the witness
20 obey the law regardless of whether or not they agree with
20 has previously said something different than whatlhe
21 it. So-- and you'll get a copy of the- of all of the
21 witness is saying who is before you in this case,
22 instructions on the elements, the concept of willfulness,
22 determine whether or not the testimony of the witness is
23 the concept of a good faith belief before you're required
23 different from the testimony of other witnes.o;es that you
24 or asked to deliberate, and it will be a little more
24 do believe and, of course, use your common sense in
25 detailed than the one I have given you at this time.
25 evaluating whether or not the statement, the information
PRELIMINARY INSTRUCTIONS BY TilE COURT

243
PRELIMINARY INSTRUCTIONS BY TilE COURT

244
provided by each witness does appear to you to be a

2 truthful statement on their p:ut. Use the normal
all know that that's not necessarily accurate, people can

2 make exroneous notations or you might not observe
3 observation skills that you have in your everyday walks of
3 something the same way that someone else does. Those
4 life. Obviously, you're going to make a determination on
4 notes are for your personal use, your personal use alone,
credibility in this case, and I will give you more

6 detailed instructions again on that at the end of the
7 case, but it is a common sense type of approach in which
you carefully observe the witnesses as they testifY.
9
Let's talk abour a couple of other things.
10 Note taking. Well, you have all got note pads, I think.
5 they're not in the evidence. And if you choose not to

6 take notes or you don't have notes on a particular point,
7 you're to rely on your own recollection and the collective
8 recollection of everybody else on the jury in detennining
9 what occurred here in the courtroom and not on a set of
10 notes. So don't be overly influenced by somebody's note
11 You're allowed to take notes in the case, and I suggest
11 or the fact that somebody bas some notes, they shouldn't
12 that you may want to keep a list of witnesses just so you
12 really talk about what are in their notes, but the fact
13 can remember everybody who testified You may want to
13 that they have some notes in making a decision. Irs your
14 make a couple of notes about what they say or do not say.
14 own observation, the observation of all of you, that is
15 Bur let me say this about notes: Don't let note taking
15 what counts in this case.

At the end of the case, again, ru give you
16 interfere with your observing witnesses. Don't get so
16
17 busy taking notes that you're not paying attention to the
17 delailed instructions. You will have a written set of
18 witness as each witness gives his or her testimony,
18 instructions. After I give you those instructions, which
19 because, of course, ifs your observations about their
19 will be there to guide you, and it's those instructions
20 testimony that is going to be far more important Your
20 that you should rely on in deciding the case.
21 notes are not evidence in the case. They're just there to
21
22 remind you individually of the testimony that you have
22 opening statement on behalf of the United States?
Mr. Murphy, are you ready to proceed with
23 beard and the observations you made as the witness was
23
MR. MURPHY: Yes, sir, Your Honor.
24 testifYing. The notes aren't to be shared with others or
24
THE COURT: You may proceed
25 used to say, well, it's in my notes, it must be true. We
25
OPENING STATEMENT BY MR. MURPHY

245

246
MR. MURPHY: Thank you, Your Honor.
evasion case. The indictment charges six counts of income
Good morning, ladies and gentlemen.
THEJURY: Goodmorning.
3 and 200 L In Counts 2 through 6. what's charged is the
MR. MURPHY: This is the part of the trial we
4 evasion was aided or - not aided, but was involved by
call opening statements. Before I even say anything, I

6 want to congraluiate you, ladies and gentlemen. I know
2 tax evasion. One for 1996, one for 1997, 1998. 1999, 2000
5 filing of false W-4 foiiilS and failure to file a return.

6 failure to pay taxes. In Count 1, it's failure to pay
7 you're going to say why is Mr. Murphy congratulating us
7 taxes and failure to file a return.
8 for sitting as a juror on a lax case. Ifs not the most
9 exciting thing in the world.
9 sbowry I anticipate, ladies and gentlemen, that the proof
10
Well, you, ladies and gentlemen. are now
Now. wbafs the proof in this case going to
10 in this case is going to show that the defendant was
11 judges, you're judges of the facts in the case. Now, you
II employed by Federai Express as a pilot, and that she filed
12 don't sit up on the bench, you're in the jury box, and you
12 income tax returns with the exception, I believe the proof
13 don't wear a robe, but you, ladies and gentlemen, listen
13 is going to be. one year from 1965 until 1992. She didn't
14 to the proof and make a decision based on the law that the
14 file any returns from '9 3 through 2001. The conduct
15 judge gives you. And I always start out by mentioning
15 that - the years involved in this case, however. are '96
16 that to people because it's very important that you
16 through 200 L
17 listen. Even a case that it's a little more exciting in
17
18 terms of what we're talking abour can be difficult to
18 substantial income in each of those years and that she bad
The proof is going to be that she received
19 listen to. So it is important that you listen, because
19 taxable income. Now. taxable income, the proof is going
20 the proof is what you're going to have to make your
20 to be, is that income that remains after you deduct
21 decision about. And I know a lot of times when you get
21 deductiOilS, personal exemptions. that sort of thing and
22 back after lunch late in the day. it's difficult to
22 that that is what you're actually taxed on.
23 listen, and I know everybody will, bur it's important that
23
24 you do.
24 proof is going to be that in 1996, the defendant bad wages
25
25 of$183,408, that she bad laxable income that year after
As the judge told you. this is an income tax
I submit, ladies and gentlemen, and expect !be

247

248
As to 200 I, I submit the proof is going to be
making deductions for mortgage interest and those son of

2 things of$162,883, and that the tax due was approximately
2 that the defendant had wage income of $190,000
3 $47,000.
3 approximately in 2001, taxable income of$161,000, in
4 2001, tax due and owing of approximately $45,000.
As to 1997, I anticipate that the proof is

going to be that the defendant had wages totaling $172,674
6 from Federal Express, thai she had taxable income that
Now, the proof is also going to show a panem
6 with the defendant's W -4 filings. You will see W -4s, but
7 year of$147,999 and the tax due and owing was
7 the proof is going to be that that is where you claim your
8 approximately $42,000.
8 withholding exemptions. The defendant in 1988 submitted a
As to 1998, I anticipate the proof is going to
10 be that defendant received approximately a $168,000 in
9 statement to Federal Express in which she claimed six

10 withholding exemptions. I anticipate the proof is going
11 wages and disability insurnnce compensation, that she had
11 to be in 1990, she submitted a W-4 toFederaiExpress
12 total taxable income of approximately $137,000, and that
12 where she had ten exemptions. Then somewhere along 1996,
13 the tax due and owing for that year was $36,507.
13 1995, Federal Express stopped withholding income tax from
14
14 the defendant's wages, and that around that time, she
As to 1999, I anticipate the proof is going to
15 that the defendant had $172,428 in wages from FedEx, that
15 submitted the W -4 and - where she claimed exemption.
16 her taxable income after making allowances for deductions
16
17 and exemptions - okay, I forgot to turn that on this
17 forms, there's a line thai says I claim exemption from
Now, the proof is going to be that on W -4
18 morning. Hopefully, I won't blow everybody out of their
18 withholding for the year, and I certify that I meet both
19 seats. Is that too loud for y'all?
19 the following conditions for exemption. Last year, I had
20
20 the right to a refund of all federal inc001e tax withheld
Regarding tax year, 2000, I submil ladies and
21 gentlemen, that the proof is going to be that the
21
22 defendant had wages from Federnl Express in the amount of
22 refund of all federal income tax withheld because I have
because I had no tax liability, and this year I expect a
23 $191,000 approximately, taxable income that year of
23 no tax liability. If you meet both cooditions, write
24 approximately $164,000, and tax due and owing of
24 exempt here, and there's a box for exempt.
25 approximately $47,000.
25

249

250
that says, under penalties of perjury, I certify that I am

2 entitled to the number of withholding allowances on this
Then if you go down, there's a signature line
paycheck was deposited. There will also be proof that

2 because of some tax problems that Ms. Kuglin had that
3 certificate or I'm allowed to claim exempt status.
3 there were levies made against her and garnishments and
4 Employee signature of Ms. Kuglin, signed her name and
4 that she was sent notice of these. That is in sum what I
5 dated it in every case. And in every case except one, she
5 anticipate the proof is going to be, and the reason we do
6 added the language reserving all of my constitutional
6 this is because we're going to have several different
7 rights in this mallet, to the perjury declaration where
7 witnesses. This isn't like television where you have one
8 you swear under the penalty of perjury that that is a
8 witness who can get up there and give you all the proof.
9 truthful statement.
10
The proof is also going to show again that once
9 I anticipate the government will have 14, 15 witnesses.

10 Most of it will go pretty quick, but this way we do this
11 that was submitted, Federal Express withheld no income
II so you can understand there will be people coming that
12 tax. Further, there is going to be proof that no tax
12 will give proof about the mortgage interest, the agent
13 returns were filed by the defendant during this period,
13 will go through the tax computation, FedEx will come in
14 and that based on the agenrs investigation, except for
14 and there will be proof about the wages paid.
15 the one year- one year where a sum of 13 --
15
16 approximately $1300 was withheld from the Kemper Insurnnce
16 just want to urge you to listen to all the proof in this
17 checks, there was no other withholding and no tax payment.
17 case, because, remember, you're the judges, and it is
Ladies and gentlemen, I am just about done.
I 8 And further, the proof is going to be that during this
18 going to be up to you to decide whether the defendant did
19 period of time, Ms. Kuglin's check was deposited at the
19 evade taxes and did so knowingly and willfully. Thank
20 Federal Express Credit Union, and from '96 till - at
20 you, ladies and gentlemen.
21 least there will be records from '96 to 2000, I anticipate
21
22 the proof is going to be that she would paid be by
22
23 electronic funds lransfer, and most days that there was a
23
24 payday, Ms. Kuglin or someone would go down to the bank
24
25 and withdraw large sums of cash that same day as the
25
OPENING STATEMENT BY MR. BECRAFT

251
OPENING STATEMENT BY MR BECRAFT

252
MR. BECRAFT: May it plea.<;e the court -- I kind

2 of hate these microphones, anybody having any problem with
you, I think you appreciated and understood the civic duty

2 that was being imposed upon you and the need here in
3 me speaking too loud or are you having any problem hearing
3 America, particularly in reference to criminal cases, for
4 me?
4 us to call in our friends and neighbors, people from the
TilE COURT: Have you got your mic on?
MR. BECRAFT: I thought I turned it on, Judge.
7 I was looking for the red light to come on.
TilE COURT: If you don't have it on. it's not
community and come in and decide a case that can't be
6 decided without your intervention.
Now, let me just tell you, ladies and
8 gentlemen, on this side of the room, we really appreciate
9 through our system, and that way you can't be heard in the
9 what you have done.
I 0 clerk's office. And we need -- you know, that's -
10
ll
ll is a eriminal case, and rve- you know, while he was
May it please the court, ladies and gentlemen
13 kind of sat down and listened to what he had to say, and I
12 giving y'all instructions lhis morning, what I did is I
12 that?
13
You know, as Judge McCalla has told you. lhis
MR. BECRAFT: Somehow, the lirtle- how is
14 of the jury, before I give you at lhis stage what lawyers
14 have written out, y'all can fault me for my handwriting,
15 call opening statement- and in opening statement what we
15 but Jet me kind of summarize, ifl can, what this case is
16 like to do is kind of give you a road map of what this
16 about. Here in America, you know, we have an indictment
17 case looks like. You know, I want to first express before
17 that comes out, it's a piece of paper or seveml pieces of
18 I get rolling this morning, something that everybody on
18 paper, and what they do i< they make a formal accusation
l 9 this side of the courtroom believes. I think Judge
19 of the commission of a crime. Here in this case, what we
20 McCalla will agree with what I say, I know Mr. Murphy will
20 have is we have got an indiclment, and I want to
21 agree with what I say Ms. Kuglin and Mr. Bernhoft. You
21 familiarize yourselves with what we're dealing with. As
22 know, yesterday when y'all came, we spent a whole day
22 you have been told before, Count I alleges that tax
23 picking the jury. A lot of you saw some of these other
23 evasion was committed in '96, Count 2 is in '97, Count 3
24 people get up, oh, you know, I got some problem, some of
24 is in '98, Count 4 is in '99, Count 5 is in 2000 and Count
25 those were real problems. But as to each and every one of
25 6 is in 200 I. Tax evasion. What is that we're going to
OPENING STATEMENT BY MR BECRAFT

254

253
purpose of opening statement is to give a road map as to
have to look at here? What are the elements, as Judge

2 McCalla told you about earlier this momingry Well, you
2 what proof is anticipated- what proof is anticipated by
3 know,lawyers talce a look at statutes, and we sit there
3 the respective party, and that does not mean usually
4 and we kind of-- we divide them into what we call
4 having a detailed discussion of the elements, that sort of
5 elements. Elements are facts. What does the government
thing.
6 have to prove beyond a reasonable doubt that a crime
MR. BECRAFT: I understand.
7 that's charge in the indictment was commirted. In this
TilE COURT: It is more of a road map.
8 situation, as Judge McCalla told you a minute ago, rm
MR. BECRAFT: I will move on, Your Honor.
9 kind of summarizing the fact or element that must be
(The following proceedings were had in open
10 proven was taxes were owed.
10 court.)
II
MR. MURPHY: Judge, can we approach for a
12 second?
ll
MR. BECRAFT: What I want to point out to you
12 is what's important for this case, what y'all are going to
13
THE COURT: You may.
13 have to decide is primarily the criminal intent that Judge
14
(The following proceedings had at side-bar
14 McCalla told you what's in issue in this case,
15 bench.)
16
MR. MURPHY: Judge, rm not trying to waylay
15 willfulness. That's that criminal intent I was telling

16 you about when we were picking the jury. The government
17 Mr. Becraft, but this is opening, not closing. And
17 is going to come in in this case and offer some proof and
18 talking about elements at this point --
18 you're going to fmd out most of it is probably not going
19
MR. BECRAFT: I want to just talk about intent.
19 to be contested by the defense. The defense does not
20 Your Honor, that is where I was headed, real quic.ldy move
20 contest -- V ernie Kuglin does not contest the fact that
21 through some of the things about what is important in this
21 she worked for FedEx and she made good money. She's not
22 case, make admissions, tell the jury what this case is
22 going to contest all these other things that the
23 about, whieh is all criminal intent. That's where rm
23 government is going to be talking about. These witnesses,
24 headed.
24 they're going to come up here and testify about how much
25
25 was made or how much interest was paid on mortgages and
THE COURT: As a geneml proposition, the

256

255
everything else. Ladies and gentlemen, that's not the
in California, married him, and as a result of have union,
2 issue in this case, at least from the defense. What is in
2 they had a son by the name of Christopher. Unfortunately,
3 question is that criminal state of mind. Did V ernie
3 that marriage didn't work out and the parties were
4 Kuglin commit the crime of tax evasion with a criminal
4 divorced. So in the early '70s, you Imow V ernie Kuglin
intent" Did she act willfully?
Now, let me tell you about --I think you need
7 to Imow something about who Vernie Kuglin is in order for
5 has been a flight attendant, she had been married, she is

6 now divorced, she has got to support a young baby boy, and
7 she does such things as become a librarian, she becomes a
book binder, she does other odds and ends, and I think one
you to make an assessment of her intent rve never ask

9 her her date of birth, and I'm not going to, but her
9 of her jobs was she worked for Welfare. but ultimately
10 parents were missionaries, and they were missionaries to
10 while doing these jobs and raising her young son. she
1 1 Africa at some time in the past, and V ernie Kuglin was
11 determined that she had an interest in flying. So in the
12 born in Africa. but her parents were from Kansas. And
12 70s, 75, 76, '77, 78, right around there, Vernie
13 after a certain number of years in the field, that family
13 Kuglin decided I want to become a pilot, and I think she
14 came back, and V ernie Kuglin enrolled in school in Kansas,
14 was living in Dallas at the time and took her first flying
15 and she ultimately, let's say, in the early '60s went to
15 lesson. After that, she became a flight instructor. By
16 college. The proof is going to be that she had enough
16 some time around 1980 or 1981, there was a company, I
17 high school credits to move without getting a degree
17 think, in Lafayette, Louisiana by the name of Royal
18 straight into college. She went a couple of years to
18 Airlines, and she became a corporate pilot for that
19 college in Kansas. Right after that, you Imow, she had,
19 company. By 1985, she did what most people wanted to do,
20 during the course of her teenage years and early college
20 hey, if you're a pilot and you want to get a job with one
21 years, she was doing things like waiting tables, being a
21 of the big commercial airlines. Well, ultimately, she did
22 waitress, but by the mid 60s, '65, 1966, she worked her
22 get a job in 1985 with FedEx. She moved to Memphis from,
23 way down to Dallas where she became a flight attendant for
23 I believe, Dallas or Louisiana, and she has lived here
24 Br.miff Airlines. And after a couple of years of being a
24 ever since. By 1985, you Imow, if you take the trolly all
25 flight attendant for Braniff Airlines, she met a man out
25 the way down to Beale Street, there is Waterford condos

258

257
materials, an excise tax can't be imposed upon the right
down there. In 1989, she bought that apartment down

2 there, or that condominium. What she does and what she
2 to earn a living. That's point number one. Point number
3 has done for most of her life is a FedEx pilot or at least
3 two, sbe has been through this Internal Revenue Code, and
4 since 1985. We alllmow what FedEx does, those pilots get
4 she thinks that those that are required to file an income
to the airport about - you know, sometime in the evening,
5 tax returns are parties that are statutorily made liable
6 and while we're in bed, those FedEx pilots are flying all
6 for a ineome tax, and she has been unable to find such a
7 over the country delivering their cargo. And after they
7 provision in the code. And finally her third major belief
go from. say, like from Memphis to Dallas or San Francisco
8 is that, you know, let's call it the Paperwork Reduction
9 or Portland, then they come back. You know, it is early
9 Act argument The government has got to assign OMB
10 morning when they get ready to go to bed, and they go to
10 control numbers to certain documents and regulations, and
II bed, and then they get up and they do the same thing.
11 from her investigation of tax laws and other items, she
12 These are night people, and thafs what Vernie Kuglin was
12 has reached the conclusion that, hey, this Form 1040
13 doing, and she was paid good money to be a pilot

14
As Mr. Murphy meotioned a minute ago, since the
13 doesn't match up with what I see here. Why do I see Form

14 2555 entitled foreign earned income as what appears to her
15 early '60S probably, I don't know the exact date, perhaps
15 to be the form that should be required to be filed? All
16 the government can tell us, all the way up through the
16 of these are oddities, but they are important for V ernie
17 '90s V ernie Kuglin was like anybody else, she filed those
17 Kuglin.
18 federal income tax returns. But what changed her mind?
18
19 What caused her to think otherwise? Let me kind of give
19 me kind of summarize, if I can. In 1992, V ernie Kuglin is
20 you a road map of what her beliefs were. I have kind of
20 probably somebody that's apolitical. One evening, as she
21 summarized them in certain categnries. If you can kind of
21
22 look at this, I want to kind -- if you're like me, you
22 the TV on, and there she is listening to C-Span and there
23 know I want to kind of categorize these types of belief.
23 is a party convention, a political party convention on,
Now, how did she arrive at these beliefs? Let
is kind of vacuuming around her condominium. she has got
24 The first, she has a belief that, well, the federal income
24 the Libertarian party, and she didn't know anything it,
25 tax is an excise tax, and based upon her reading of
25 and she sat down to watch this Libertarian party

259
convention, these people debating, and she said, you know,
2 I'm kind of interested in this. As a result of seeing

260
somehow some way, she will tell us, but this is a cassene
2 series, constitutional convention by Walter Cronkyte, the
3 what she saw on TV, she contacted a m:m that lives here in
3 ratification debates, the Bill ofRights, the text to the
4 Memphis, Don Winfield, and as a result of them talking,
4 United States Constitution, she starts listening to stuff
ultimately V ernie Kuglin is becc:ming somebody who is
5 like this. She starts reading the Declaration of
6 extremely interested in the Libertarian party. She and
6 Independence. She reads, you know, publications that are
7 Mr. Winfield, they kind of go to little meetings around
7 put out, Freedom Daily. She reads books that she has
the state to fellow Libertarians. She goes to meetings in
never read before, things that explain politics, economics
9 other cities across America, and as she is getting into
9 and taxation. And this process of learning about the law
10 this study and comprehension and understanding of the
10 for her for the first time is very revealing. Ultimately,
11 message of the Libertarian party, she starts encountering
11 by some time in '92 or '93, she is beginning to engage in
12 and ruooiog across tax information. People in the
12 a real delailed study of the law, what she perceives to be
13 Libertarian party are saying, well, you know - they're
13 the law. Now, I need to tell you before I get into the
14 talking about taxes. Well, as a result of the talking
14 delails of this, I want to -- I made a promise to Judge
15 about taxes, you know, Veroie hears such things as people
15 McCalla earlier, and I make a promise to you now, you
16 saying, well, you know, it's voluntary. And V ernie checks
16 know, what is going to be important in this case is Ms.
17 that out, and, you know, she sees actual government
17 Kuglin's beliefs and whether or not you believe that they
18 documents, our tax system is based upon voluntary
18 were her firmly held beliefs. Now, her belief., you know,
19 compliance. That creates, you know, a view of the tax
19 when she gets up there on the stand, I want to you
20 laws that she has never seen before. She always thought
20 remember this one fact. When she says, well, I think this
21 it was mandatory. Now, the government is saying our
21 is the law or I believe that this is what the law is, I
22 remember system is based on voluntary compliance. Well,
22 want to tell you right now, and I'm going to bring this up
23 once she starts seeing these documents, she makes a
23 with one of the first series of questions I'm going to be
24 commitment I want to learn something about the federal
24 asking her, our position is that's what she says up there
25 income tax laws. One of the first things that she did is
25 are her beliefs about the law. Don't confuse it with what

261
the cowt is going to tell you in the way of jury
2 instructions at the end of this case. But Ms. Kuglin has
certain beliefs about the Jaw. She studied the United
4 States Constitution, she found out that the Constitution

262
case, so fundamentally important that that is the reason
2 why there's no state income tax here in Tennessee. So it
3 is logical from her viewpoint to draw a conclusion based

4 upon what she understands are cowt cases, and she reaches
5 authorizes Congress to impose two types of taxes. She did
5 the conclusion, well, hey, I can see how people are
6 kind of a study of the history of income taxation at the
6 talking about you may not owe the federal income tax. But
7 federal level. She learned that in 1895, you know, she
7 she doesn't stop there, she moves on and she does some
8 read some documents that she thought were decisions of the
8 other studying, what I call legal belief number two up
9 United States Supreme Court, a case called the Pollock
9 there on the screen. What she did is, as you can see, not
10 case that held bad income tax unconstitutional. She read
10 that we're going to be offering this into evidence, you
11 and studied stuff about the ratification of the 16th
11 can see that by July of 1994, Vernie Kuglin had ordered a
12 Amendment, the federal income tax amendment She read a
12 copy of the Internal Revenue Code. Big thick book. She
13 case called the Brushaber case and reached the conclusion
13 reads some documents that come from the IRS that identify
14 that in a constitutional sense, the federal income tax is
14 the various laws that require you to file a return. So
15 an excise tax, point number one as I put up here. Now,
15 she said I'm going to sllldy those laws, and she sits down
16 she dido't stop there. What is important for Vernie
16 and does it, and, you know. when she reads what she
17 Kuglin is in her mind she envisioned, well, the federal
17 believes to be Section 6001 of the Internal Revenue Code
18 income tax is a thing known as an excise tax. So what is
18 and 6011 of the Internal Revenue Code, she says that the
19 an excise tax? And so she started reading cases, and one
19 law for filing returns, it doesn't say something like
20 of the things that was real important for V ernie Kuglin
20 every American, it says something to the effect that every
21 was a case that she thought was the Tennessee-- the
21 person liable, without telling you who it is. So as a
22 Supreme Cowt case of 1960 called the Jack Cole against
22 result of looking at the law. Vernie Kuglin starts looking
23 McFarland, and she read that case, and it says an excise
23 around and llying to find am !liable for the federal
24 tax can't be used to tax the right to earn a living. And
24 income tax. and to make a long story short, she ultimately
25 she concludes that that is a very fundamentally important
25 goes through the income tax sections of that big thick
OPENING STATEMENT BY MR. BECRAIT

264

263
is an ordinary American, and you can say that an ordinary
book over there and reaches the conclusion, well, I only

2 found one statute that makes anyone liable for the federal
2 American has a right to sit down and read what she
3 income tax, that's the only agent for nonresident aliens
3 understands to be the law, to read cases and draw
4 and foreign corporations, and I'm not a nonresident alien
4 conclusions, and so as a result of her studies, what
5 and I'm not a foreign corporation, and I'm not making
5 Vemie Kuglin did is that for '93, '94, '95 or
6 payments to nonresident aliens and foreign corporations.
6 thereabouts, you know, she is working at FedEx and she is
7 So she reaches the conclusion, hey, I don't have to flle
7 having withholding from her wages, but by the fall of '95,
8 income tax returns. But then perhaps one of the fmal
8 she is committed to her position, she really believes that
9 things that kind of, you know, kind of solidified her
9 she is not required to file returns, she really believes
I 0 beliefs was this thing about the Paperwork Reduction Act.
10 that she is not subjected to withholding. She has a
II She will explain what her beliefs are about this
11 meeting some time in 1995, one of the people that she met
12 particular law. You will hear OMB conlrol numbers on
12 here in Memphis had a little problem with the IRS, and
13 forms. There are OMB conlrol numbers on regulations. She
13 they go down to a meeting, and at this meeting, you know,
14 knows that under this particular law, a tax regulation has
14 where V ernie Kuglin gets to see the IRS inter - dealing
15 to have an OMB conlrol numher. She knows or she believes
15 with somebody who is claimed to owe taxes, she stlrts
16 that Section one of the Internal Revenue Code is the
16 aslcing questions. And she learns that the IRS agents
17 section that imposes the tax. She knows that the
17 don't want to answer the questions, and so she is directed
18 regulation that corresponds to that is Treasury Regulation
18 to study the law, go to the law library or hire a lawyer.
19 1.1-l. Now, Vernie Kuglin took a publication that comes
19 So what does V ernie Kuglin do as a result of what the IRS
20 from the government and merely looked up to see what is
20 told her? Goes to the library, runs over there to Memphis
21 the form that applies to the tax imposed section of the
21 State, does studying. She runs into an organization that
22 Internal Revenue Code. And to her amazement, she came up
22 has lawyers on board. Ultimately, she gets those lawyers
23 with this Form 2555 entitled foreign earned income.
23 to do some things for her. She did what the IRS said do
24
Now, ladies and geotlemen, you can't say that
25 Vemie Kuglin is a legal scholar, but you can say that she
24 as a result of this meeting. But then by the fall of

25 1995, Vemie Kuglin --I think she said she wrote a lot of

266

265
this while she was flying, but she writes some letters to
somebody in the government had answered those questions.
2 the IRS, October of'95, November of'95. She has got a
2 So this case, ladies and gentlemen, let me tell you what
3 series of questions that she poses to the IRS, one of
3 it boils down to. I think that this is the redeeming
4 which is what law makes me liable for the federal income
4 thing of this case. Tax evasion is not committed by
5 tax and, therefore, required to file an income tax return.
5 reading the law and relying on the government lbis,
6 She sends it to the IRS. Did she get a response? No. A
6 ladies and gentlemen, is acting in good faith. That's
7 month later, she sends another letter to the IRS. Does
7 what the evidence will show in this case. And that,
8 she get a response? No. Those are two letters that we're
8 ladies and gentlemen, is the reason why V ernie Kuglin is
9 going to offer into evidence here. Now, having not
9 not guilty. That concludes my remarks. I hope that we
10 received a reply from the governmen~ V ernie Kuglin
10 can finish this case by sometime tomorrow afternoon.
II decided that there's something to hide, and she started
II Thank you.
12 implementing her beliefs, which are not something thafs
12
13 drawn out of the thin air, but virtually everything that
13 witness.
TilE COURT: Mr. Murphy, you may call your first
14 she believes comes from the law or the government itself.
14
MR. MURPHY: Yes, sir, Your Honor.
15 So by December 29th, December the 30th of 1995, Vemie
15
lliE COURT: If you would stop right there and
16 Kuglin gets around to submitting to FedEx this document
16 raise your right hand at the podium. I'm going to let you
17 right here. which is the first exempt Form W -4 with a
17 get over to the microphone, thanks very much. Do you
18 bunch of attachments. Thereafter -- you know, the
18 swear that the testimony you are about to give in this
19 government is going to bring in somebody from FedEx, hey,
19 case will be the truth, the whole truth and nothing but
20 think Vernie Kuglin submitted this W-4 exempt You bet
20 the truth, so help you God?
21 Vemie Kuglin is a woman that has firmly held beliefs.
21
TilE WITNESS: I do.
22 Those firmly held beliefs caused her to ask questions of
22
TilE COURT: You may have a seat up here.
23 the IRS. Ultimately, she hired lawyers to ask these
23
24 questions of the IRS. You know what, ladies and
24
25 gentlemen? This whole p.-oblem could have been resolved if
25
DIRECT- MARY ANN OSBORNE

267

268
Q.
MARY ANN OSBORNE,

2 was thereupon called as a witness on behalf of the
Ma'am, I passed you a document, would you tell me what
2 that document is?
3 Plaintiff, and having been first duly sworn, was
3 A.
4 examined and testified as follows:
4 trnnscript, what we call a complete.
DIRECT EXAMINATION
6 BYMRMURPHY:
7 Q.
A.
Q.
This is a certified copy of the individual master ftle
Now, what information goes in an individual master file
6 tr:mscript?
Would you state your name, please, ma'am0
7 A.
1\.fary Ann Osborne.
8 all actions, transactions or anything taken or done to the
The individual master file transcript is a record of
9 Q.
And who do you work for, Ms. Osborne?
9 taxpayel's account.
10 A.
I work for Internal Revenue Service.
10 Q.
II Q.
And what do you for the Internal Revenue Service?
11 I passed to you, who was that for?
Okay. And that particular individual master ftle that
12 A.
My job title is court wibless coordinator.
12 A.
V ernice Kuglin.
13 Q.
Okay. Are you also involved with- you have got
13 Q.
Would you spell the frrst and last name?
14 knowledge of how the IRS keeps custody of documents?
14 A.
First name V-E-R-N-I-C-E. Last name K-U-G-L-I-N.
15 Q.
And what was the social security number for that
15 A.
Yes, sir, I represent the custodian of records, I do
16 prepare, research and receive these documents and do prepare

17 them for court.
18 Q.
Okay.
16 taxpayer?
17 A.
The social security number i s -
18 Q.
All right. Now, can you examine that document and tell
19
MR MURPHY: Your Honor, if! could approach.
20
THE COURT: You may.
20 income tax returns, rather?
21
MR MURPHY: We have already shown this to
21 A.
22 defense counsel.
MR BECRAFf: May it please the court, for this
23
19 us what years, if any, Ms. Kuglin has ftled income taxes,
The firSt income tax return ftled was in 1965. Let me
22 back up just a little bit. The first document we have of

23 something being done to this account was in 1965.
24 witness, there's not going to be any objection to the
24 Q.
Okay.
25 exhibits that Mr. Murphy offers.
25 A.
1966, 1967.

269
Q.
2 A.

270
Now, '66 and '67, tax returns were filed?

rm assuming they were. Looking at this document, I
3 cannot tell you for sure.
return.
2 Q.
Now, does that record indicate that there were any
3 levies on any withholding monies
4 Q.
Okay. Keep going.
4 A.
5 A.
There is nothing listed here for 1969, so there is
5 there was withholding credited to this account.
The 1993, the 1994 and the 1995 tax return show that
6 nothing documented for 1969. There was something done to this
6 Q.
Okay.
7 account in 1970, 1971, 1972, 1973, 1974, 1975, '76, '77, '78,
7 A.
The 1993 return shows that there were two payments made
8 '79, '80, '81, '82, '83, '84, '85, '86, '87, '88, '89, '90,
8 to these accounls, and if rm correct, I think these were levy
9 '91, '92, '93.
9 payments.
10 Q.
Were tax returns filed in '93?
10 Q.
II A.
Yes, there was.
II the account?
12 Q.
Okay. Now, what kind of tax return was filed in '93?
12 A.
Yes, it would
13 Q.
Does that record indicate that there were notices sent
13 Was that a substitute return?
Okay. And would a levy payment show up as a payment on
14 A.
Yes, sir, it was a substitute return.
14 out to the taxpayer of some kind regarding the levies
15 Q.
Okay. What is a substitute return?
15 A.
Yes, sir, it does.
16 A.
A substitute return is where enough data has been sent
16 Q.
Okay. Can you tell us the date that the notices were
I 7 in to Internal Revenue Service by businesses, banks or
17 sentout?
18 whatever to enable them to assess tax on a tax return.
18 A.
11-11-1996, what we call a stat notice 26 was sent out
19 Q.
Okay. And does the IRS file a substitute return?
19 to the taxpayer regarding the 1993 tax return. 6-15-1998, a
20 A.
The IRS does prepare the substitute return.
20 notice was sent out to the taxpayer regarding the 1994 return.
21 Q.
Okay. And how about '94, was a return filed?
21 6-15-1998, a notice was sent out to the taxpayer regarding the
22 A.
Yes, sir, there was. This was also a substitute
22 1995 return.
23 return.
23 Q.
24 Q.
Okay. Again, who prepares the substitute return?
24
25 A.
Internal Revenue Service prepares the substitute
25 request that that document be marked as Exhibit 1.
Okay. Thank you, ma'am.

MR. MURPHY: Your Honor, at this time, we

271

272
TIIE COURT: Yes, it will be Exhibit I in the
2 case_
(Exhibit Number I was marked. Description:
4 Notes to Taxpayer- 1996.)

5
0-
Ma'am, rm going to pass you another document Can you
Yes,sir.
0.
What is an IRP document'
3 A.
An IRP document is a document that is sent into the
4 service center. It could be W-2 to '98, to '99. Same type of
5 information is reported to social security. This gives
6 tell me what that document is?
6 information of income that was received and paid by the
7 A
7 taxpayer.
0-
9 A
10
This document is certification of lack of record.
0.
And is that a document that you prepared'
Yes. sir, it is.
0-
II A
9 A
0.
Okay. And is this information compiled'

Yes, it is.
And is it formatted in a form that's referred to by the
And what does that document indicate?
10
This document indicates that there bas been no record
II IRS as an IRP?
12 of any return being filed by the taxpayer for 1996, 1997,
12 A
Yes, sir.
13 1998, 1999, 2000 and 2001.
13 0.
Okay. And would these documents-- these IRP document'
14
0.
Thank you. So that would be based on your examination
14 have, for example --
15 of the IRS records, and there was no indication of any type of
15
16 return was filed?
16
17 A
No type of return was filed for those yean;.
MR. MURPHY: Your Honor, at this time, we would
18
19 ask that this record be introduced as Exhibit Number 2 in

20 the case.
TIIE COURT: Would you spell the word IRP?
0.
17 A
19
20
TIIECOURT: Thankyou.
0.
THE COURT: It will be Exhibit 2 in the case.
21 A
22
(Exhibit Number 2 was marked. Description:
22
24
0.
Ma'am. are you familiar with some records that are
25 referred to in the IRS as lRP documents?
I A
0.
24 A
25
3 A
4
0.
0.
3 A
4
This is an information returns on-line tr.mscript,
Yes, it does.
Would it also show wage income?
And when you use the term tax year, would that be for
Yes, sir, it would.

Okay. So it would run from January the 1st of '97 to
5 December 31st?
Yes, sir.
MR. MURPHY: Judge, if we could have this
marked as the next numbered exhibit
And what year is that for?
This is for the tax year 1996.
10
Okay. And you-- this came from the IRS records?
II
1997 IRPTRO.)
Yes. sir. it did.
12
0.
10 A
11
0.
6 A
8 security number
o.
Okay. Now, would these IRP documents show mortgage
2 most individuals the calendar year?
Yes, it does.
7 which is IRPTRO, for the taxpayer Vernice Kuglin, soeia1
0.
Ma'am, I'm going to pass to you a document Can you
tell me what that document is?

6 A
Yes, we call it IRP,I-R-P.

274
Yes, it does.
And interest income?
0.
When people shorthand it, they call it an IRP?
23 payments that was made?

273
The command code that is used to pull this information
18 up is spelled IRPTRO.
21
23 Cert. of Lack of Record.)
What are the initials?
o.
12 A
MR. MURPHY: Your Honor, at this time we would
13
14 ask that this be marked as Exhibil3 in the case.
TIIE COURT: Exhibit 4.

(Exhibit Number 4 was marked Description:
Ma'am, I'm going to pass to you another document Can
13 you tell me what that document is?

14 A
This document is also an information returns on-line
15
THE COURT: It Exhibit 3 in the case.
15 tr.mscript. again IRPTRO for V ernice Kuglin. social security
16
16 number for the tax year 1998.
17 !996IRPTRO.)
18
0.
Ma'am. I'm going to pass another document to you.
MR. MURPHY: All right. At this time, we would
17
18 ask that this be admitted into evidence as the next
19 Excuse me. Can you tell us what that document is?
19 numbered exhibit
20 A
20
TIIE COURT: Exhibit 5.
21 on-line tr.mscript. again. IRPTRO. captioned Vernice Kuglin --
21
22 I'm sorry if rm pronouncing the name.
22 1998 IRPTRO.)
23
This document is also a tr.mscript, information returns
0.
24 A
I think it is Kuglin.
23 BY MR. MURPHY:
Kuglin. Social securit_y4881~for the tax year
24
25 1997.
0.
Ma'am, I'm going to pass you another document Can you
25 tell me what this document is?

276

275
I A.
marked as the next numbered exhibit.
This document is an information returns on-line
2 transcript, again, IRPTRO for Vemice Kuglin, social security
THE COURT: Exhibit 8.
3 number
. . for the tax year 1999.
MR. MURPHY: Your Honor, we would ask that this

be marked as the next numbered exhibit.
4 2001 IRPTRO.)
5 Q.
Ma'am, rm going to hand you another document, can you
THE COURT: It is Exhibit6.
6 tell us what that document is?
7 A.
9 Q.
This is a certificate of assessments, payments and
other specified matters for a Form 1040, U.S. individual
8 Information Returns.)
Ma'am, I pass you another document, can you tell me
9 income tax return captioned V emice Kuglin, social security
rt
I 0 what that document is?
10 numbet
II A.
II Q.
Okay. What does that document indicate?
12 again, IRPTRO, for Vemice Kuglin, social security number
12 A.
This document indicates that a tax return was flled for
13
13 1992, it shows the adjusted gross income, the taxable income,
14
This is an information returns on-line transcript,
for the tax year2000.
Q.
14 the document locator number of the tax return filed, the
Thank you.
MR. MURPHY: Your Honor, we would ask that be
15
for the tax year !992.
15 amount of tax that was assessed on this tax return, the
16 admitted as the next numbered exhibit.
16 withholding credit that was allowed this taxpayer and the
17
THE COURT: Exhibit7.
17 refund that was issued to the taxpayer.
18
18 Q.
Okay. What were those-- can you go through those
19 2000 IRPTRO.)
19 figures for us?
20 Q.
20 A.
Ma'am, rve handed to you another document, can you

22 A.
This is an information returns on-line transcript,
23 again, IRPTRO for V emice Kuglin, social security number

for the tax year 200 l.
24
MR. MURPHY: Your Honor, we would ask this be
25
Yes, I can. I'm showing that the adjusted gross income
21 for 1992 was $112,084. I'm showing of that amount the taxable
22 income was $86,644. The tax on this return was $20,892 with a
23 document locator number of 49221104650003, withholding credit
24 of$22,228 with a refund to the taxpayer of$1,336.
25 Q.
Okay. Thank you.

278

277
due and owing in that case?
MR. MURPHY: Your Honor, we would ask this
There's a balance due showing of zero on this account.
2 record be made the next numbered exhibit.
2 A.
THE COURT: Exhibit9.
3 Q.
And what does that mean?
4 A.
It means that all the taxes due on this account had
5 been paid by levy or by withholding and that there is no
1992 Certificate.)
6 Q.
Ma'am, I'm going to pass to you another document Can
7 you tell us what that document is?

8 A.
This document is a certificate of assessments, payments
6 additional taxes due and no refund due the taxpayer at this

7 time.
8 Q.
For that year?
9 and other specified matters forFonn 1040, U.S. individual
9 A.
For that specific year.
10 income tax return captioned Vemice B. Kuglin, social security
10 Q.
And does that document also indicate that there was any
II number
II contact with the taxpayer, any ]etten; or anything like that
for the tax year 1993.
12 Q.
Okay. What does that document indicate?
12 sent to her, notices?
l3 A.
This document indicates the adjusted gross income, the
13 A.
14 taxable income, the document locator number for the substitute
Yes, sir. Delinquency notice was sent to the taxpayer
14 on4-17-1995. Another delinquency notice was sentto the
15 for return. It also shows that two extensions were filed by
15 taxpayer on 6-12-95. Another delinquency notice was sent on
16 this taxpayer.
16 7-24-1995. Another delinquency notice was sent on 9-4-1995.
17 Q.
Now, what is an extension?
17 The statutory notice of balance due was sent to the taxpayer
18 A.
An extension is filed on or before April the 15th
18 on 9-9-1996, and a statulory notice of intent to levy was sent
19 asking for additional time to file your tax return by the
19 to the taxpayer on 9-30-1996. There are additional notices of
20 taxpayer.
20 balance due on this account of- from 1997, '99, 2000, 2001
21 Q.
Okay. And does-- does that indicate that there were
21 and2002.
22 levies made or assessments made against the withheld
22 Q.
Thank you, ma'am.
23 taxation - tax money?
23
24 A.
Yes, sir, it does.
24 marked as the next numbered exhibit.
25 Q.
Okay. And at the end of the year, what was the balance
25

280

279
a fee, our collection cost of$16.

2 1993 Certificate.)
3 Q.
Ma'am, I'm going to pass to you a document. Can you

5 A.
2 Q.
Okay. Does that document indicate any notices were
3 sent to the defendant regarding her tax situation?
4 A
Yes, sir, there was. There was a statutory notice of
balance due sent out on ll-24-1997, statutory notice with
This document is a eertificate of assessment payments
6 and other specified matters for Form !040 U. S. individual
6 intenttolevywas sent out on 12-15-1997. There was another
7 income tax return captioned Vernice Kuglin, social security
7 statutory notice of balance due sent out on 4-6-1998.
number 0
9 Q.
a ,for the tax year 1994.
Okay. Now, does that show that any-- that a
Q.
Okay. And there's a balance due and owing on that
9 account?
Yes, sir, there is, there is a balance due of
l 0 substitute return was filed?
!0 A.
ll A
Yes, sir, it does.
ll $16,428.97.
12 Q.
Again, who makes out the substitute return
12 Q.
13 A.
The Internal Revenue Service prepares the substitute
13
14 for return.
And that 1994 tax year, had there been taxes withheld
15 Q.
16 from Ms. Kuglin's pay?
Thank you, ma'am.

MR. MURPHY: Your Honor, we would move this
14 document into evidence as the next numbered exhibit.

15
THE COURT: Exhibit 1!.
16
17 A.
Yes, there was.
17 1994 Certificate.)
18 Q.
In what amount?
18 Q.
19 A.
Withholding credit of $22,218.
19 you take a look at that and tell us what it is?
20 Q.
Okay. Now, were assessments or levies made for that
20 A.
21 tax year?
Assessments were made for the tax year of- well,
22 A.
23 lefs see, you have an estimated tlx penalty for $395, you
Ma'am, rm going to show you one final document Can
This is a certificate for assessment payments and other
21 specified matters for Form 1040U. S. individual tax return

22 captioned Vemice Kuglin, social security number
23 for the tlx year 1995.
Now, does it show any- does it show a tax return was
24 have a filing penalty for $2,534. You have tlx assessed of
24 Q.
25 $32,353. You have interest assessed for $3,348.97. You have
25 filed for '95

282

281
A.
A substitute for return was filed for 1995.
marked as the next numbered exhibit.
2 Q.
Okay. And does it show any withholding?
3 A.
Yes, sir, it shows withholding of $24 ,31!.
4 Q.
Okay. And what taxes were paid with that sort of
5 thing?
6 A.
1995 Certificate.)
5 Q.
No tlxes were paid other than the withholding on the
7 account. There's estimated t1x penalty assessed of970.
7 into?
A.
Excuse me, $970.

9 Q.
Okay.
10 A.
There's a late filing penalty for $5,!!8. The tax
Ma'am, for people-- if you can answer this, for people
6 living in Tennessee, where do they send their tax returns
Memphis.
9 Q.
Okay. Is there an IRS Service Center here?
10 A.
Yes, sir, there is a service center here in Memphis.
ll assessment on the account was $44,783, and interest is
!!
MR. MURPHY: One second, Your Honor.
12 assessed of$3,925.59.
12
Judge, we don't have any further questions for
13 Q.
Okay. Does that document indicate that any notices
13 Ms. Osborne.
14 were sent out to Ms. Kuglin?
14
THE COURT: Cross examination?
15 A.
15
MR. BECRAFf: Could I ask the court something
Yes, sir, there was. In ll-24-97, a statutory notice
16 of balance due was sent to the taxpayer. 12-15 of 1997, a
16 about morning break?
17 statutory notice of intent to levy was sent to the tlxpayer.
17
THE COURT: It will be fairly soon.
18 Again, on 3-9-98, an additional notice of intent to levy was
18
CROSS EXAMINATION
19 sent to the tlxpayer.
19 BY MR. BECRAFT:
20 Q.
20 Q.
Any other notices?
21 A.
No, sir.
21 A.
Goodmoming.
22 Q.
And what is the balance due on that account?
22 Q.
How long have you worked for the Internal Revenue
23 A.
The balance on this account is $30,485.59.
23 Service?
24 Q.
Thank you, ma'am.
24 A.
25
Good morning, Ms. Osborne.
I have worked for the Internal Revenue Service for
25 approximately 28 years.
CROSS -MARY ANN OSBORNE

283
Q.
Did you start out in the position that you're in now?
2 A.
No, sir, I did not.
CROSS- MARY ANN OSBORNE

284
letters, answered questions concerning these accounts, tried
2 to explain a little bit about the accounts. I have also
3 Q.
What was your first job?
3 worked in what we call notice review where after the tax
4 A.
I was a data transcriber.
4 return has been prepared, that's for the balances, whether
5 Q.
And data transcriber, correct me if rm wrong, if we
5 you're going to get a refund or whether you're going to get a
6 were sitting down at the IRS office in the spring of every
6 balance due notice is sent to this area, and we check it to
7 year, you have all of this infonnation that is flowing in and
7 make sure it is correct. We go back and check the return to
people that are data transcribers are taking information,
9 typing it in. loading it into the computer, is that correct?
see if any payments or anything else was left off of the
9 account. I was in criminal investigation, worked for the
10 A.
That's correct.
ll Q.
How long were you a data transcriber?
11 accounts. We verified to see if these refunds were valid
!2 A.
I was a data transcriber for approximately four months.
12 refunds.
10 questionable refund unit where we questioned refunds on tax
!3 Q.
And what did you do after that?
13 Q.
!4 A.
I went to an area called photocopy.
14 function that you're in nowry
15 Q.
And- just kind of give us an idea of what you have
15 A.
You mentioned criminal investigation. is that the
Yes, sir.
16 done at the IRS since you started to work for them.
16 Q.
All right
17 A.
17 A.
That's a part of the function rm in now.

So you have been working criminal investigation for bow
I started as a data transcriber. From there, I went to
18 photocopy unit where requests are sent into the IRS for
18 Q.
19 photocopies of your tax returns. We photocopy this
19 long?
20 information and send it to you for your records. From there,
20 A.
I have been in criminal investigation for nine years.
21 I went to a typing unit where I transcribed letters that will
21 Q.
Nine years. And that requires you to do things like--
22 be sent out to the taxpayers. From there, I have worked many
22 you said, I believe, on direct that you're a court witness.
23 places. I have worked- majority of my time was spent in
23 A.
Yes, I am.
24 collections where I worked with tax delinquent accounts and
24 Q.
That means coming to court and testifying in cases lilce
25 where I set up installment agreements for taxpayers, written
25 this?

285
I A.
Court witness coordinator is my current job title.
2 do research accounts. I request the information for these

286
is input is something that you can ultimately see when you get
2 a computer printout known as an IMF, right?
3 accounts and prepare these accounts for court for the special
3 A.
Yes, sir.
4 agents.
4 Q.
For something lilce a tax return that flows into the
5 Q.
Now, can I describe for you- you know, you have
5 service center, is it not true that one of the first things
6 offered into- through your testimony Exhibit Number 1. Can
6 that gets done or at some stage of this process, you mentioned
7 I ask you some questions about that, about how ifs ereated?
7 during your direct testimony this thing known as a document
8 A.
Yes, sir.
9 Q.
Okay. That's the IMF complete?
9 A.
10 A.
Yes. sir.
10 Q.
It gets stuck on a return, right?
II Q.
Let me ask you these questions, see if I got the
I! A.
Every document that comes into the service center has
12 pieture right. A whole bunch of information flows into
locator number?
Yes, sir.
12 to have a document locator number because that is what we use
13 service centers, you got tax rerurns, you got all sorts of
13 to track and try to find this document.
14 documents?
14 Q.
15 A.
Yes, sir.
!5 1040- you mentioned I think you were reading off on the '92
16 Q.
And they flow in and the data transcribers sit down and
All right. And that information, you know, let's say a
16 return a document locator number for Ms. Kuglin's return?
17 take the information off of it, right?
!7 A.
Yes,sir.
18 A.
Yes, sir.
!8 Q.
All right. And that gets inserted about the time that
19 Q.
And that information gets inserted into the IRS
19 the return gets filed, right?
20 computers, right?
20 A.
Yes, sir.
21 A.
Yes.sir.
21 Q.
And that information gets logged into the computer,
22 Q.
And so these - these inputs of information are made at
22 right?
23 a certain time, correctry
23 A.
Right.
24 A.
They are made all during the year.
24 Q.
And so that if someone like you wants to fmd
25 Q.
All right. And the approximate time in which the data
25 something, all you have to do is pull up the electronic file

288

287
on every one, righl?
specific
laX
year, for !he lax year 1996. You also have !997
2 A
ClarifY by what you mean by electronic file.
2 in here, 1998, 1999 and 2000.
3 Q.
Okay. The individual master file.
Yes, sir.
For !he benefit of lhe jury, an individual masler file
5 Q.
4 A
Q.
MR. BECRAFT: Your Honor. can I approach again?

THE COURT: You may.
I've just siUCk back on- in front of you !here
6 iskindofa-
6 Government's Exhibit Number I, and can you kind of compare
7 !hem? I'm just asking for lhe -- Government's Exhibit Number
MR. MURPHY: Judge, I'm going 1o objecllo
!, I don't know !he dale on it, but -
8 counsellestif'ying. He can ask !he wibless a question.

9
MR. BECRAFT: I will frame it in a question.
9 A.
10
THE COURT: All right
10 entity information, !he lax returns !hal have been fLied by
Is il nol true !hal an individual masler file is
II Q.
Number 1 is a complele, which is every year, your
II Ibis laxpayer. The exhibit you gave me, thi one is for a
12 basically !he compuler record regarding !he various document
12 specific year. They are one and !he same, but !he specific is
13 !hat are filed regarding a particular individual?
13 broken down per each lax year where !he complele is all of !he
14 A.
Yes, sir.
15 Q.
All right So you can print il oUI and il will say
14 lax years together.

15 Q.
You don't deny --lislen 10 my question, on Government
16 Exhibit Number I, I don'! know !he dale, but off !he top of my
16 year?
17 A
I can call up specific years.
18 Q.
Okay. And- but !hen, you know, to lalce a look-
17 head, I think it is November of2002, is !hal about right?

18 A
R;ght
19 well, ler me ask you !his: May I approach !he wibless, Your
19 Q.
Okay. And Defendant's Exhibit Number 52 bears a dale,
20 Honor?
20 correct me if I'm wrong, it says !0-9-<>f200!?
21
THECOURT: Youmay.
22 Q.
Now, I don'! have Government Exhibit Number 1, but I
23 have rendered lo you a copy of Defense Exhibit Number 52, and

24 I would like lo ask if you could identifY !hat forme, please.
25 A.
Yes, sir, !his is a IMF, individual masler flle for a
21 A
R;ght
22 Q.
Now, do you deny lhatlhis is an aulhentic print !hat
23 comes from !he IRS's compUier regarding V ernie KugJin?

24 A
What do you mean do I deny?
25 Q.
Well, do you accept lballhis is a specific -

289
I A
Yes, sir.
MR. BECRAFT: Your Honor, may I move for lhe

290
admission of Defense Exhibit 52.
!hal's fine, as long as we're not on !he microphones.
THE COURT: All I have to do is hit !hat bunon
3 and !hey can't hear you.
MR. MURPHY: Okay. Good.
THE COURT: Now, you're at side bar.
MR. MURPHY: Close enough. Judge, !he defense
6 1MF Transcript)
7 Q.
Can I ask you some questions about !his and since I
7 is going to offer a copy of this IMF transcript, and on
8 have a copy of this one and not !he government's, can we refer
8 it, it has got- for several of lhese years, and il
9 to Exhibit Number 13?
9 indicates a modified balance, accrued inleresl and penalty
10 A
Yes, sir, I have turned to !he same page.
I 0 of zero, zero, zero for some of !he years covered in !he
11 Q.
Let's show !he jury what !his looks like.
II indicbnent And !his wibless - Ibis particular wibless
12
MR. BECRAFT: If it please !he court. I have
13 got copies.
14
THE COURT: Have you got your microphone on?
12 didn't testifY !hat !here was any lax due and owing or
13 lballhe IRS was carrying a balance on !he account for !he
14 years in question. So I would submit !hat it goes outside
15 We willlalce a break and Jet y'all work out !he
15 of !he scope of !he direct, and it also may be confusing
16 lechnology.
16 because I believe what !he IRS procedure is if they don't
17
MR. BECRAFT: Thank you, Your Honor.
17 have enough information or if !here's nol wilhholding,
18
THE COURT: Back in ten minules.
18 !hey typically don't figure people's !aXes as opposed to a
19
(Recess lalcen at 10:35 untill0:55 a.m.)
19 case where !hey have wilhholding and !hey do have
20
THE COURT: Yes, sir, Mr. Murphy.
20 information.
21
MR. MURPHY: We have got one matter to lalce up
22 at side bar.
23
THE COURT: Okay. Sure, come on up. I mean
21
MR. BECRAFT: If! may, Your Honor, !hal's not
22 where I'm headed. The government doesn't doubt !hat !hat

23 comes- lhafs a document !hat comes straight oUI of
24 !here's nobody in here.
24 discovery. For all of my exhibits, I unfortunately
25
25 premarlced all of my exhibits and pul defense stickers on
MR. MURPHY: The only thing is if we're on-
l~--------------------------~~---------------------------

291

292
them, but I'm using that particular exhibit because it's

2 bandy, it's similar to Government Exhibit Number l. The
MR. BECRAFT: There's two different types of

2 transcripts, Your Honor. One is a complete and one is a
3 witness has authenticaled it, and what Mr. MUiphy fears is
3 specific.
4 the use to which I will be pulling the document is simply
5 not the case. I'm not going to talk about-- you know, we
5 stricken or what do you want'?
6 got -- what Mr. MUiphy gave to me in discovery bears a
MR. BECRAFT: No, I offered it, Your Honor.
7 date in Novemberof2001 --or Octoberof200l, and the
THE COURT: Mr. MUiphy wants me to do something
THE COURT: Let me see l. You want Exhibit 13
8 one that the government has used, which is a similar kind
8 to 13.
9 of computer record printed out is about a year later, but,
10 you know, I'm not making any bones of contention about the
10 thar's -- I don't think you can use another document to
ll difference in the transactions between the two documents.

MR. MURPHY: Judge, and my understanding is
12
MR. MURPHY: Well, Judge, I don't think
ll cross-examine the witness -- you know, the witness about

12 of a business record like this. Or ifl had some idea
13 there isn't any difference. We just -- in order for her
13 about what he was trying to do, it may be something that I
14 to certify a copy of it, she had to print anew one.
14 would just say, yeah, he gets to do it, Judge.
15
MR BECRAFf: Okay.
15
16
THE COURT: What do you want to do with Exhibit
16 only- the reason-- Your Honor, I would like to have a
MR BECRAFf: I wanted to use it primarily
18 forced to kind of operate off of my discovery copy, which
17 copy of Government Exhibit l, I don't have one, so I'm
17 13?
18
MR. BECRAFT: I mean I can limit it to --my
19 because I don't have a copy of Government 1, which I would
19 is what I was doing.
20 like to-
20
THE COURT: All you have to do is put it on the
21
22 screen.
THE COURT: Okay. Then I'm not clear what is
21 being said, but it sounds like Exhibit 13 is withdrawn,

22 and you just want us to make a copy of Exhibit l. Let's
23
MR BECRAFf: Sure.
23 make a copy of Exhibit I and give it to him. Is that all
24
THE COURT: 13 is just duplicate.
24 we need to do?
25
MR MURPHY: That's fine.
25

293

294
tha1 relate ID a particular party, right?
THE COURT: All right Without objection,

2 Exhibit 13 is withdrawn.
MR. MURPHY: Judge, we're going to see if we
4 have got a copy of what -- of what this witness -THE COURT: They're making a copy right now.
6 It doesn't make any difference.
MR. BECRAFT: Yes, Your Honor.
2 A
Correct.
3 Q.
So maybe in a few moments we'll will have Government
4 Exhibit Number l back, but generally what you do- you know,
5 in order for you to make a determination about filing or

6 nonfiling in this case, you had to go to the computer, pull up
All right. I show it as withdrawn. Anything
7 Vernie Kuglin's individual master file, correct?
8 A
Would you repeat your question, please?
MR. MURPHY: No, sir, Your Honor.
9 Q.
Government Exhibit Number 13, you probably have printed
10
MR. BECRAFf: That's it, Your Honor.
lO out the same thing several times before, at least, right?
7
8 else?
11
THE COURT: You can bring the jury in.
11 A.
Yeah.
12
(Jury in at 11:00 a.m.)
12 Q.
Every time you print it out, it is just basically the
13
THE COURT: If you're keeping track of the
13 same thing except if you got a later transaction, the later
14 numbers of exhibits, Exhibit 13 was simply withdrawn by
14 transaction will show up on a later print, is that about
15 agreement. Exhibit l apparently has the same data on it,
15 rigbt?
16 and we didn't need another document, so we now have 12
16 A.
l 7 exhibits, and 13 is withdrawn.
17
MR. BECRAFT: May I approach, Your Honor?
Yes, sir, you may proceed.
18
THECOURT: Youmay. Youcanjustputiton
MR. BECRAFf: Thank you, Your Honor.
19 the screen.
18
19
20 Q.
Ms. Osborne, we were, before the break, talking about
21 how Government Exhibit Number l, a computer printout named
20
21 Q.
Correct.
MR. BECRAFT: I will do that, Your Honor.

Okay. Ms. Osborne, you can probably refer to the
22 individual master file was create<l And, in essence, over a
22 original of Government Exhibit l and I will use a copy and I
23 period of time, various transactions are made or insertions
23 will stick it up on the Elmo, and lees - okay. Thi is what
24 into the computer are kind of stored so tharthe IRS can print
24 Government Exhibit l look like, correct?
25 out a document which contains all-- basically all the entries
25
THE COURT: Let's just put Exhibit 1 on the

296

295
screen. that's what we will do. Is that 1?
MR. BECRAFT: Yes, Your Honor, it is. It's a
A.
2 Q.
The cycle was 1966, cycle 20.

Okay. So you can take a look at this type of
3 copy. This is a copy.
3 information and get a real good idea as to what happened?
THE COURT: Let's use the original.
4 A.
Yes, sir.
MR. BECRAFT: All right.
5 Q.
All right. So you're interpreting it, correct?
THE COURT: The reason we do that, ladies and
6 A.
Yes, sir.
7 gentlemen, is you should be able to look at the original
7 Q.
Now, flip over to the second page, page number two of
8 or whatever is going ID be shown to you in the jury room,
8 this. Okay, now -
9 there is no reason for you to later wonder.
MR BECRAFT: Thank you, Your Honor.
10
11 Q.
You were talking- or when you testified on direct
12 about the returns that had been filed, you - in essence, you
THE COURT: It should be on your screen right
10 in front of you.
11
THEWITNESS: Yes.
12
MR. BECRAFT: Let me move it out a lirtJe.
13 were doing - you were looking at this document, and based
13
14 upon your knowledge of how things get printed out, kind of
14 Q.
THE COURT: Sure.

It looks like I have got everything on page two up on
15 interpreting it, is that correct?
15 the screen, is that right?
16 A.
That's correct
16 A.
Fairly close, yes, sir.
17 Q.
All right. So looking at page one of Government
17 Q.
And right down here where my fmger is pointed, there's
18 Exhibit Number 1, you know, you got these transactions -- you
18 the words tax period 30, 1993, 12.
19 see where my finger is pointed over here on the left side of
19 A.
Yes, sir.
20 thepage?
20 Q.
And that's kind of interpreted, that's the-- the 12 is
21 A.
Yes,sir.
21 the end of the year?
22 Q.
These are years down here in the middle so, that, you
23 know, very first year is 1966?
22 A.
Right
23 Q.
Ofl993?
24 A.
Actually, that's a cycle.
24 A.
Right.
25 Q.
Okay, cycle. Would that relate ID the year 1966?
25 Q.
Right? And so what the IRS does is that for everything

297
that related to year 1993, people log this stuff into the
2 computer, and so you're able to print out and show what
3 happened at a particular time, right?
4 A.
Yes, sir.
5 Q.
Now, for-- I flipped over to page three of Government

298
Q.
Okay. And then it isn't until you get down to page
2 five that we get into '94 information, right?

3 A.
That's correct.
4 Q.
Okay. Where the jury is looking at my fmger?
A.
Uh-hub.
You can see tax period, 30, and that relates to '94?
6 Exhibit Number 1, and I think that you said that for 1993,
6 Q.
7 this is a printout of everything that relates to Ms. Kuglin
7 A.
Yes, sir.
8 for the year 1993, is that correct?
8 Q.
And '94 bas got -- I'm flipping to subsequent pages,
9 A.
Everything that came through the service center, yes,
10 sir.
9 and all of this is in computer lingo, so to speak, right?

10 A.
Well, yes, sir, in a way.

The people inside the IRS know what these various
11 Q.
At least up to the date of 11-7 of2002, right?
11 Q.
12 A.
Yes, sir.
12 transactions mean, right?
13 Q.
Okay. And so you reached the conclusion that for 1993,
13 A.
Most of them do, yes, sir.
14 Q.
But in order ID understand what they really mean, is
14 there was a substitute for return filed in November of'95,

15 right?
15 there some kind of a manual that tells you what certain things
16 A.
Yes, sir.
16 mean like this transaction code 140 that my fmgerwas on just
17 Q.
Okay. Wberemyfmgersarepointed?
17 a second ago?
18 A.
Yes,sir.
18 A.
Yes, sir.
19 Q.
And so to-- you see this number 150 out to the side?
19 Q.
Is that a document 6209?
20 A.
Yes, sir.
20 A.
Yes, sir, it is.
21 Q.
Is that what is known as a transaction code?
21 Q.
Is document 6209 something you're familiar with?
22 A.
That is a transaction code.
22 A.
Yes, sir, it is.
23 Q.
Okay. You have to be very familiar, somebody in your
23
Q.
All right. Now, let me flip over to '94, lees see,
24 page four bas more information about '93, right?
24 job that ha. worked in the position that you have worked for
25 A.
25 nine years, you pull up these computer printouts regarding a
Right.

299

300
whole bunch of people all the time, right?

2 A.
Q.
Yes, sir, I do.

And then you have to kind of look at them and, you
4 know -- this is plainly not English, it's transactions that

are kind of coded in a certain way, but you know what their
6 meaning is, is that correct?
7 A.
3 or the absence of a aansaction code, is that correct?

4 A.
That's correct.
5 Q.
And the absence of a transaction code-- let me back
6 up. A minute ago, I mentioned something and you did too,
Yes, sir, I do.
7 mentioned something about a document locator number?
Now, I think on your direct testimony, you mentioned
8 A.
Yes, sir.
9 for '94, there was a substitute for return?
9 Q.
And if I could direct us - I happen to be on page five
10 A.
Yes, sir.
10 which relates to the year 1994, and you see this on the far
II Q.
Okay. fm on page five, what rm showing on the Elmo
Q.
>
filed an income tax return, what you do for like the later
2 years, what you did is you're looking for a aansaction code
12 here, you see where my finger is, tax period 30?
II left-hand side where my fmger is SFR, aansaction code !50,

12 right?
13 A.
Yes, sir.
13 A.
Uh-huh.
14 Q.
So if the jury is looking at this document, going back
14 Q.
And then this is date of the year?
15 to page five and six, all the way up to some spot, about
15 A.
The date that it was processed.
16 halfway down the page of page seven, that's the information
16 Q.
And that would be-- let's see, that's-- what is that
l 7 that relates to '94?
17 date, that's 1997?
18 A.
Yes, sir, it is.
18 A.
04-21-1997.
19 Q.
And you reached the conclusion about substitute for
19 Q.
And then out here to the side, you see where my finger
20 return - you see where my fmger is on page five?
20 goes, thats a 14 digit number?
21 A.
Yes, sir.
21 A.
Yes, that's document locator number.
22 Q.
Substitute forreturn that would relate for year '94 is
22 Q.
If you wanted to find something, if you're looking for
23 indicated where my finger is placed, SFR 150?
23 a particular return or maybe some other type of document, this
24 A.
Yes, sir.
24 computer printout, you know, will have that document locator
25 Q.
Now, in order for you to conclude that someone has not
25 number over there, and with that document locator number, you

301

302
Tiffi COURT: Put one side on this side and one
I can fmd any document that has been filed by the IRS, right?
2 A.
I can request that document, yes, sir.
3 Q.
They're not necessarily stored around here, but you
2 side on this side. Come over here, Mr. Murphy, that way
3 you're talking between her.
MR. MURPHY: Judge, we're going to object to
4 would know where a particular document is stored and contact
5 that party and say, hey, give me the document that has this
5 asking questions about the code book. You know, the
6 document locator number on it, right?
6 relevance of it.
7 A.
Yes, I have to submit my request to a person and they
TilE COURT: It sounds like it would be
8 pull the document.
8 irrelevant.
9 Q.
MR. BECRAFT: Well, Your Honor, the--
I 0 significance to anybody except people in the IRS that can
10
THE COURT: Tum your mic off.
II understand what the aansaction codes mean, what the document
II
MR. BECRAFT: I think I got it off, Judge.
12 locator numbers mean, it simply is not in plain English, is
12 Your Honor, this is - I don't want to belabor the point,
13 that correct?
13 thats not my purpose.
Okay. Now, but as - all of this stuff has no real
TilE COURT: Okay. If you agree with the
14 A.
That's correct.
14
15 Q.
And- but there is a manual that kind of tells us what
15 government, move on.
16 certain things mean, is that correct?
16
17 A.
Yes, sir.
17 Number I, and there is certain information on there that
18 Q.
And how long have you studied or been using or been
18 this witness is going to testify that she is familiar with
MR. BECRAFT: The government offered Exhibit
I 9 familiar with this document 6209?
19 the very manual I have got. True, the manual is not in
20 A.
For about 25 years.
20 evidence, but the manual is what I use in order to
21 Q.
Okay.
21 interpret the very document that the government has
22
MR MURPHY: Judge, could we approach?
23
THECOURT: Youmay.
23
24
24 her good fuith belief.
25 bench.)
22 offered into evidence.
25
THE COURT: It doesn't have anything to do with
MR. BECRAFT: There's a transaction code on the
I!
304
303
MR. BECRAFT: Your Honor, this is what I would
government's document that I would like to have the
2 witness explain, that's where I'm headed One transaction

3 code or one computer en!Iy.
TIJ:E COURT: Does it have anything to do with an
5 issue that is going to be decided by the court?
2 like to point out for the benefit of the jury, in
3 reference to the inteJpretalion of Government's Exhibit

4 Number!-
TIJ:E COURT: What is the thing we're
MR. BECRAFT: I think it does.
6 interpreting?
TIJ:E COURT: What issue is it?
MR. BECRAFT: I will go ahead and tell the
8 headed--
MR. BECRAFT: And according-- where I'm
9 court. Can I run back here and get something?
10
THE COURT: Sure.
l 0 we looking for?
ll
MR. BECRAFT: This will be my offer of proof if
ll
THE COURT: rm looking on my screen. What are
MR. BECRAFT: This is -- I had it premarlc:ed as
12 53, but the manual, there's a certain transaction on the
12 thel3
THE COURT: Sure.
13 Government Exhibit Number 1, it's called a mail filing
14
MR. BECRAFT: Your Honor, I have got it over
14 requirement, it is present on that document, it is mail
15 here. This is the manual. Mr. Bernhoft got it, I have
15 filing requirement 01, and I think it is beneficial for
16 got my own manual This is Mr. Bernhoft's copy of the
16 the jury 1o have the witness say there is a code on
17 manual.
17 Government Exhibit Number l that ultimately construed,
THE COURT: Does she say that she got the
18
19 manual, reviewed the manual?
18 according 1o the manual, says return not required to be

19 mailed to file. That's the point rm !Iying 1o make with
20
MR. BECRAFT: They use the manual all the time.
20 this examination.
21
THE COURT: Did the defendant say that she got
21
22 the manual and used the manual?

23
MR. BECRAFT: No, Your Honor.
24
THE COURT: All right. Then let me understand
25 how it has got anything to do with anything.
23 has to do with is the-- you know, they mail returns out

24 to everybody.
25

305
TIJ:E COURT: Right.
306
this is - this goes to the impeachment of- well,
MR. MURPHY: That has to do with the mailing of

2 returns. But I mean I think what she is going to say is
MR. MURPHY: Well, Judge, here is the thing.
22 This came up when we were getting ready for it, what that
2 construction of the document.
3 that that is a misinterpretation, that the return doesn't
4 have 1o be filed
4 defendant relied on it, it's not relevant. And this
TIJ:E COURT: The main thing is for me 1o
MR. MURPHY: Well, but, Judge, unless the
5 witness didn't offer an opinion that this defendant had 1o
6 understand is where do you say that -- the IRS has some
6 file a tax return.
7 document, something that she relied on, she can tell us
8 ahout it, but this doesn't sound like this is what it is.
8 what the codes are on here. It has got a bunch of codes
9 It sounds like this is an internal -
10
MR. BECRAFT: I have been down this road a
THE COURT: I mean we have got-- let's see
9 on here. I mean unless she had something that she relied

10 on, it wouldn't matter what is in an internal document-
ll number of times, Your Honor. This is an official document
11 this is an internal document?
12 of the government 6209 interprets all that computer
12
MR. BECRAFT: Yes, Yow-Honor.
13 stuff.
13
TIJ:E COURT: It is a computer printout It's
14
THE COURT: Sure.
14 their road map.
15
MR. BECRAFT: There is a code on Government
15
MR. BECRAFT: Right
16 Exhibit Number I, and as I lead through, Your Honor I can
16
TIJ:E COURT: Well, I mean if she had gotten the
17 show the court, if the court wants me to run over there
17 notice that said 0 l, not required 1o file a return, then
18 and get it off the Elmo, I will show you where it is.
18 that's one thing, but that's not - this isn't it, this is
19
THE COURT: Sure, that's fine.
19 just part of the certificate of official record, and it
20
MR. BECRAFT: That symbol, page number one, MFR
20 then has a series of codes on it, a lot of other
21 0 l, it's called mail filing requirement of the manual, and

22 these are the transactions for mail filing requirement.
23
THE COURT: Uh-huh.
24
MR. BECRAFT: And that symbol right there
25 construed, according to the manual, it says- and I think
21 information. I think Mr. Murphy is right, I don't see how

22 it's going to go anywhere, that is lead to anything that
23 is relevant 1o any issue in this case to ask this witness
24 about this code. Mr. Murphy, why-- what harm does it do?
25
MR. MURPHY: Well, Judge, I think it creates
~--~---

307

308
confusion, and the gist of his defense is, I relied, you
TIIE COURT: Where is this from?
2 know, I-- if it's a good faith defense, there is nothing
3 that shows that she relied upon this. And I think it is
3 offer of proof would be that I would get her to
4 going to confuse everything.
4 authenticate the manual, authenticate that this is a page
TIIE COURT: I think it is conceded that she
MR. BECRAIT: That's from their manual. My
5 from that manual, page 8-77.
6 didn't have this document, that's wbat I under.;tood to be
TIIECOURT: Okay.
7 said.
MR. BECRAIT: You know, this is just an exhibit
MR.BECRAFr: Yes.
TIIE COURT: And that she didn't utilize this
that I would tender in support of this line of questioning
9 elicited from this witness.
I 0 document in making -- in forming her beliefs. and,
10
I I therefore, it really is not probative on the issue before
II make it A or Exhibit A in the case.
TIIE COURT: That's no problem. If you want to
12 the jury.
12
MR. BECRAFT: Okay.
13
MR. BECRAIT: Okay, Your Honor.
13
THE COURT: This is not an exhibit received, it
14
THE COURT: So I'm going to sustain Mr.
14 is just marked for identification.
15 Murphy's objection.
MR. BECRAIT: Your Honor, can I also offer,
16
15
MR. BECRAIT: Yes, Your Honor.
16
TIIE COURT: This is marl<:ed as Exhibit A for
17 being mindful that I have stuck exhibit stickers on this,
17 identification.
18 can I move this labeled Defendants Exhibit 53, which
18
MR. BECRAFT: Thank you, Judge.
I 9 is -- put it in the ID category?
19
(Exhibit Number A was marked. Description:
THE COURT: I mean this hasn't been presented
20
21 through anybody I could receive it through anyway. could

22 I?
20 Document 6209.)
(fhe following proceedings were had in open
21
22 court.)
MR. BECRAIT: No, this is my offer of proof,
23
Now, Ms. Osborne, I'm going to -do you have the copy
23 Q.
24 where I was ultimately headed. This is a document that
24 in front of you?
25 construes -
25 A

309
Yes, sir.

310
I'm going to-- you made some statements about --page
I A.
I have no idea about that.
2 number four relates to the year 1993, is that correct? Let me
2 Q.
Okay. Are you familiar with the process that, you
Q.
3 show you - can you see page number four up there on the
3 know, in a situation like this, that the government ha.< to
4 screen'?
4 send out what is known as a ticket to tax court. a 90-day
A.
6 Q.
Yes, sir.
I'm going to look toward the bottom of page number
7 four, do you see that on the screen?
letter?
6 A.
Yes, sir, I'm familiar with a 90-day letter.
7 Q.
Does have it a cerlain particular transaction code0

The TC 300 usually has a 90-day Jetter that is a
8 A.
Yes. sir.
8 A.
9 Q.
You see these things, MF stat notices?
9 associated with it
10 A.
Yes, sir.
10 Q.
11 Q.
That's what you call thern, right?
11 year 1993 -- and I'm looking at page three and moving over to
12 A.
Yes. sir.
12 page four, those transaction codes, is there anything there
13 Q.
Now, you said during the course of your direct
14 testimony that for '93 and '94 and maybe '95, you correct me
Okay. Do you see anything that in reference to the
13 that would indicate to you that this procedure of sending out

14 a notice of deficiency was a procedure that was done?
15 if I'm wrong, that there were taxes withheld for Ms. Kuglin?
15 A.
The 90-day letter?
16 A.
Yes, sir.
16 Q.
Yeah.
17 Q.
And that at some stage there was an SFR or substitute
17 A.
I couldn't tell on this specific tax period.
18 for return that the IRS prepared for Ms. Kuglin, correct?
18 Q.
Well, isn't it customary or routine, at least, if the
19 A.
Correct.
19 government sent out a 90-day letter to someone to say that you
20 Q.
And ultimately there was a conclusion made by the IRS
20 owed additional taxes, that type of transaction would show up
21 that additional monies were due and owing, right?
21 on this document, Government Exhibit 1?
22 A.
Yes, sir.
22 A.
I couldn't say.
23 Q.
And, in essence, the government then levied upon the
23 Q.
Okay. Well, do you see-- flipping over to '94, and
24 money that was withheld from her paycheck for '93, '94, '95,
24 I'm on page five, and I'm going to flip over to page six,
I
I
25 is that correct?
25 where my fingers are, I'm going down the left side of the
li
----------------------------------------------------------~~----------------------------------------------------------
I:

311

312
sent to the taxpayer.
page, those are tr.msaction codes, right?

2 A
Yes, sir.
2 Q.
3 Q.
Now, do you see anylhing there !hat would indicate that
3 an entry that is recorded here, you have no personal knowledge
You don't know wbether a document -- other than seeing
4 a 90-day letter had been sent to Ms. Kuglin?
4 that actual notices were acrually sent to Ms. Kuglin, is that
5 A
Not on this specific document.
5 correct?
6 Q.
Okay. How about - let me flip over to my next- I
6 A.
No, sir, I don't know.
7 moved over to page seven, is there anything on there that
7 Q.
And you have no actual knowledge that even 90-day
8 would tell you that a 90-day letter had been sent to Ms.
letters were sent to Ms. Kuglin at least for '93, '94, '95"
9 Kuglin?
9 A.
I0 A
Under the stat notices, no, sir.
10 out when a tr.msaction code 300 is assessed, no, sir, I do
II Q.
AU right. Do you have any -- other than you reading
ll not.
Other than the fact that I know what is supposed to go
12 from this document, you can't tell us whether or not the
12
MR. BECRAFT: Nothing further, Your Honor.
13 IRS -- you know, you said during your direct testimony, you
13
THE COURT: Redirect?

MR. MURPHY: If I could see some exhibits, Your
14 know, a notice was sent on such and such a date. Your
14
15 testimony in that respect arises just from you doing something
15 Honor.
REDIRECT~ATION
16 like looking at this government exhibit, and, for example, on
16
17 page number ten, looking at the stat notices down there at the
17 BY MR. MURPHY:
18 bottom of the page, right?
18 Q.
19 A.
19 marlced as Exhibit 9 in this case, and would you take a look at
Yes, sir.
Ms. Osborne, I'm going tD pass to you what has been
20 Q.
And that's the way you reach certain conclusions?
20 that?
21 A
Most cases.
21 A.
Yes, sir.
22 Q.
And just because something appears there, you say,
22 Q.
Okay. What is Exhibit 9?
23 well, I guess a notice was sent?
23 A.
This is the certificate of assessments, payments and
24 A
24 other specified matters for the year 1992.
Notices have specific numbers, and those specific
25 number.; will indicate which notice or what type of notice is
25 Q.
REDIRECT-MARYANNOSBORNE
313
REDlRECT- MARY ANN OSBORNE

314
going to tum to page two. Does that indicate notices were
Exhibit 1 without computer codes?

2 A.
No, sir, it does not, '92 was not included on this.
3 Q.
Okay. fm sorry. fm sorry. Let me ask this: I've
4 gone back !DO far. fm showing you wbat has been marlced
Does that contain some of the information that's in
2 sent to Ms. Kuglin?

3 A
Yes, sir, it does.
4 Q.
Okay. And fm going 1D show what you has been marked
5 Exhibit 10. Now, what is that?
5 as Exhibit 12 in this case. Again, what is Exhibit 12?
6 A.
6 A.
7 other specified matters for the Form 1040 for 1993.

8 Q.
Okay. Let's put it up on the screen. Now, does this
It is a certificate of assessments, paymenrs and other
7 specified matters for Form 1040 for lhe tax year 1995.
8 Q.
Okay. Thank you.
9 contain some of the information that's -- that's in Exhibit 1?
10 A
Yes, sir, it does.
10 uncoded form?
11 Q.
Okay. And is this that information without the codes?
11 A.
Yes, sir, it does.
12 A
Yes, sir, it is.
12 Q.
And does that particular document indicate that a
13 Q.
Okay. And, in fact- well, does Exhibit 10 indicate
13 statu!Dry notice of intent to levy was issued on March lhe 9th
Now, does this also contain information that is in the
14 that delinquency notices were sent?
14 ofl998?
15 A
Yes, sir, it does.
15 A.
Yes, sir, it does.
16 Q.
Okay. fmshowingyouwhat'sbeenmarlcedasExhibit 11
16 Q.
Okay. So the-- the certificates of assessments,
17 in this case. What is that, ma'am?
17 payments and other specified matters for 1040, those contain
18 A.
18 uncoded language?
19 other specified matters for Form 1040 for the year 1994
19 A
20 Q.
20
Okay. Now,l'm going to put this document up on the
Yes, sir, it spells it out in plain English.

MR. MURPHY: Okay. Onesecond, YourHonor.
21 camera. Now, does this particular document also contain
21
Judge, I don't have any further questions.
22 information that was in Exhibit 1, for lack of a better word,
22
THE COURT: All right. Thanks very much. We
23 in the uncoded form?
23 will let you step down.
24 A
Yes, it does.
24
25 Q.
Okay. And does that indicate notices-- well, I'm
25
(Witness excused.)
THE COURT: Who is our next witness going tD
l~---~----
DIRECT-KIMBERLY GILLUM
316
315
KIMBERLY GILLUM,
MR. MURPHY: Your Honor, it is going to be Kim
3 Gillum from Federal Express.
THE COURT: If you would stop there at the
DIRECT EXAMINATION
5 podium and raise your right hand. Do you swear that the
6 testimony you are about to give in this case will be the
6 BY MR. MURPHY:
7 truth, the whole truth and nothing but the truth, so help
you God?
9
THE WITNESS: Yes.
7 Q.
Would you state your name, please, ma'am?
8 A.
Kimberly Gillum.
9 Q.
And would you spell your first and last name for the
10
l 0 court reporter?
ll
ll A.
K-1-M-B-E-R-L-Y G-1-L-L-U-M.
12
12 Q.
Who do you work for, ma'am?
13
13 A.
FedEx.
14
14 Q.
And what is your position with FedEx?
15
15 A.
Paralegal records custodian.
16
16 Q.
They call them at FedEx these days, it's still Federal
17
17 Express?
18
18 A.
It is still Federal Express.
19
19 Q.
And is -- as part of your duties as custodian, are you
20
20 involved with the records at FedEx?
21
21 A.
Yes.
22
22 Q.
Okay. rm going to hand to you a document and ask you
23
23 to tell us what that document is, please.
24
24 A.
This is Vernice Kuglin's employment application.
25
25 Q.
And does it -
DIRECT-KIMBERLYGILLUM
318
317
MR. BECRAFT: No objections, Your Honor.

2
THE WITNESS: I do.
Is that an employment application for FedEx?
THE CLERK: You may take the witness chair.
Yes, it is.
THE COURT: All right.
2
Q.
4 A.
and nothing but the truth, so help you God?
And what's the date it was issued or signed?
6A.
Junel7,1985.
7 Q.
Okay. And what position was Ms. Kuglin applying for'?
8 A.
Pilot.
Q.
MR. MURPHY: Your Honor, at this time, we would
l 0 move that into evidence as the next numbered exhibit.
9
10
ll
ll
12
12
13 Application.)
14
MR. MURPHY: And I don't have any further
15 questions, Your Honor.
l3
14
15
16
MR. BECRAFT: No questions, either, Your Honor.
16
17
THECOURT: Ms.Gi!lum,thankyou. Wewilllet
17
18 you step down.
19
20
(Witness excused.)
MR. MURPHY: Your Honor, the next witness is
18
19
20
21 Elizabeth Edwards.
21
22
22
23
THE CLERK: Will you please raise your right
23
24 hand? Do you swear the testimony you are about to give
24
25 the court and the jury to be the truth, the whole truth
25
DIRECT - ELIZABETII EDWARDS

320
DIRECT- ELIZABETII EDWARDS

319
ELIZABETII EDWARDS,
2 was thereupon called as a wilness on behalf of the
l A.
She is at the desk on my right side, has on an orange
2 jacket.
4 examined and testified a< follows:
4 me, Your Honor.
MR. BECRAFT: Stipulate she is sitting next to
DIRECT EXAMINATION
TIIE COURT: Well, that's not the question. So
6 BY MR. MURPHY:
6 you want to finish the question?
7 Q.
7 Q.
8 A.
Elizabeth Edwards.
Ma'am, does FedEx keep records of the amount of wages
they pay people that work out there and the amount of taxes
9 Q.
And how do you spell your fii"St and last name?
9 withheld and that sort of thing?
lO A.
E-L-1-Z-A-B-E-T-H E-D-W-A-R-D-S.
lO A.
ll Q.
Who do you work for?
ll
12 A.
Federal Express Corporation.
12 Judge, if you want --1 don't think there's going to be
Yes, sir.
MR. MURPHY: Your Honor, if! may approach.
l3 Q.
What do you do at Federal Express?
13 any objection to these, 1 can put these on the screen and
14 A.
I'm manager of payroll taxes and gamisbments.
14 she can look at them on the screen.
15 Q.
Okay. And are you involved with income tax withholding
15
TIIE COURT: Without objection, they can be
16 on FedEx employees and maintenance of the W -4s, that sort of
16 displayed.
17 thing?
17
18 A.
Yes, sir.
19 Q.
Now, do you know a lady that works for FedEx named Ms.
20 Vemice Kuglin?
MR. BECRAFT: Let me just look real quick, Your
18 Honor. No objections, Your Honor.

19
TIIE COURT: All right We can mark them
20 sequentially, 13, 14 --how many are there?

MR. BECRAFT: 1 don't know, could we staple it
21 A.
Yes,sir.
21
22 Q.
Do you see Ms. Kuglin in the courtroom today?
22 altogether and put one exhibit sticker on it?
23 A.
Yes, sir.
23
TIIE COURT: It is really up to Mr. Murphy.
24 Q.
And can you describe for us where she is seated and
24
MR. MURPHY: Judge, 1 don't have an objecrion
25 what she is wearing, please?
DIRECT- ELIZABETII EDWARDS

321
could make it collective. Collective Exhibit 14.
3 W-2s.)
4 Q.
Okay. Ms. Edwards, if you look at the screen up there,
5 I'm going to tty and zoom in on this. Do you recognize that
25 to that This is all W-2s I'm going to deal with now. We
DIRECT- ELIZABETH EDWARDS

322
Q.
Okay. And, again, what year was that for?
2 A.
1992.
3 Q.
Now, I'm showing you another document, do you recognize
4 that document?
A.
Yes, 1 do.
And what is that document?
6 document?
6 Q.
7 A.
Yes, sir.
7 A.
lt'safacsimileofthe 1993W-2.
8 Q.
And what is that dOCUIDent?
8 Q.
And who is it for?
9 A.
It's a facsimile of a W-2 for the employees.
9 A.
Vernice Kuglin.
I 0 Q.
And is - did you - these documents 1 have got, you
10 Q.
Andwhatamountof--whatwa<herpay?
II gathered a bunch of these up for us?
II A.
Her wages, federal wages?

Herwages.
12 A.
Yes, sir.
12 Q.
13 Q.
And these came from FedEx records?
13 A.
$107,386.87.
14 A.
Yes, sir.
14 Q.
And does that particular document show the amount of
15 Q.
Now, is that your handwriting at the bottom of the
15 federal tax withheld?
16 date?
16 A.
$20,847.53.
17 A.
Yes, it is.
17 Q.
Okay. Is that that figure with federal tax next to it?
18 Q.
And is that a document for Ms. Kuglin?
18 A.
Yes, it is.
19 A.
Yes, it is.
19 Q.
Okay. I'm showing you another document, can you tell
20 Q.
Okay. How much in wages were reported?
20 us what that document is?
21 A.
$113,29325.
21 A.
It's a fu.csimile of the W-2 for !994.
22 Q.
Okay. And how much federal tax was withheld?
22 Q.
Who was that for?
23 A.
$22,227.65.
23 A.
VemiceKuglin.
24 Q.
Is that that figure right next to fed tax?
24 Q.
Okay. And what were the amount of- Ms. Kuglin's
25 A.
Yes, it is.
25 wages in that year?
~~I----------------------------------------------~~-------------------------------------------------
DIRECT- ELIZABETI! EDWARDS

324

323
I A.
$118.815.
2 Q.
And how much federal income tax was held?
2 A.
1996.
3 A.
$24.311.24.
3 Q.
I have got another document that is up there on the
4 Q.
And is that tbal: figure with the word fed tax written
4 screen. Can you see it okay?
next to it?
6 A.
Yes, it is.
7 Q.
rm showing you another document, can you tell me what
Q.
What year was that for then?
5 A.
Yes.
6 Q.
Okay. What is that document?
7 A.
It's a facsimile of the W-2 for the year 1997.
8 Q.
And what amount of wages does that document show?
It's a facsimile of the 1995 W-2.
9 A.
$172,674.37.
10 Q.
And is tbal: for a p;lrticularFedEx employee?
10 Q.
And how much federal income tax was withheld?
II A.
For Vemice Kuglin.
II A.
There was zero federal tax.
12 Q.
And how much did Ms. Kuglin make that year?
12 Q.
rm going to show you another document. What is that
13 A.
$112,112.85.
13 document?
14 Q.
And that would he tbal: figw-e right there?
14 A.
It's a W-2 for Vemice Kuglin.
15 A.
Yes. sir.
15 Q.
Okay. And what year is it for?
16 Q.
And does it show how much federal tax was withheld from
16 A.
1998.
17 Q.
Okay. And what was the amount of wages?
that document is?

9 A.
I 7 her paycheck?
18 A.
$22,218.73.
18 A.
$164,1%.
19 Q.
Okay. Ma'am, rm showing you another document. can you
19 Q.
And was any tax withheld?
20 tell me what tbal: document is?
20 A.
No federal income tax.
21 A.
It's 1996 facsimile of the W-2 for V emice Kuglin.
21 Q.
Okay. rm going to show you another document that's
22 Q.
And what was the amount of wages paid to Ms. Kuglin?
22 part of this collective exhibit. What is that document"
23 A.
$183,408.01.
23 A.
It'saW-2for 1999forMs. VerniceKuglin.
24 Q.
And what was the amount of federal tax withheld?
24 Q.
And what was the amount of wages she was paid that
25 A.
There was no federal tax withheld.
25 year?

326

325
A.
Q.
You're going to have to bring that a little closer.
Ma'am, can you tell us what a Form W-4 is for?
2 Q.
I have the same problem.
2 A
3 A.
1724-$172.428.
3 employee, their social security number, name, address, number
4 Q.
And how much federal income taxes withheld?
4 of wilhholdings for income tax purposes, federal income tax
5 A.
There was no federal incomes withheld.
5 purposes.
6 Q.
The next document I'm showing you. what is tbal:?
6 Q.
7 A.
Its a W-2 for Ms. Vernice Kuglin from the year 2000.
7 Exhibit 15. Can you tell me what that is?
8 Q.
Okay. And what was the amount of her wages that year?
8 A.
This is a Form W -4 from 1988 for V ernice B. Kuglin.
9 A.
$191,292.99.
9 Q.
If you would go through all the other documents in
10 Q.
And was any federal tax withheld?
10 there.
11 A
No, there was no federal tax withheld.
II A.
12 Q.
Okay. What's the document that's up there now?
12 VerniceKuglin,l998W-4forVerniceKuglin.l999W-4forMs.
13 A.
Its a copy of the W-2 from the year 2000 forVemice
13 Kuglin and a 2000 W-4 forMs. Vernice Kuglin and 2001 forMs.
W -4 provides the employer the information from the
rm going to pass you what has been marked Collective
1990 Form W -4 for V emice Kuglin, 1997 W -4 for M.
14 Kuglin.
14 Venrice Kuglin W-4.
15 Q.
15 Q.
Okay. And these were records that came from FedEx?
16 tbal:year?
16 A.
Yes, sir.
17 A.
$190,673.37.
17
18 Q.
And was any federal tax withheld?
18 admitted into evidence as Exhibit 15.
Okay. AndwhatwastheamountofwagesforMs.Kuglin
19 A.
There was no federal income tax withheld.
19
20 Q.
Okay. Tbankyou.
20
21
MR MURPHY: Judge, we have got a group ofForm
22 W -4s, if we could make that collective exhibit.
21 Q.
MR MURPHY: Your Honor, we would ask this he
MR BECRAFT: No objection, Your Honor.

TilE COURT: Its received.
If you would, ma'am, in 1988, how many withholding
22 exceptions did Ms. Kuglin claim?
23
THE COURT: Certainly. 15.
23 A.
Six.
24
24 Q.
Would you go to the next form, and in 1990, how many
25 W-4s.)
25 did she claim?
DIRECT- ELIZABETI-I EDWARDS

327
A.
DIRECT- ELIZABETH EDWARDS

328
Ten.
Q.
And to a particular account?
Whafs the next W -4 form?
2 A.
Yes.
3 A.
1997.
3 Q.
What's the account number?
4 Q.
Okay. And in 1997, what did M<. Kug!in claim as her
4 A
- - and it goes to the bank ID number is
2 Q.
status regarding income tax withholdings?
5 ....
6 A.
Exempt.
6 Q.
7 Q.
Okay. And if I can-- keep going through that, what is
7 you this something, before we move this into evidence. Is
the next year?

9 A.
1998 was exempt. 1999 is exempt. 2000 is exempt.
Okay. Thank you. Judge, at tllis time-- let me ask
8 this the kind of thing that would -- that would take place
9 because an employee directs it?
lO 200 l is exempt.
lO A.
Yes.
ll Q.
11 Q.
Okay.
12 like to show you. Ma'am, rm going to show you another
12 A.
The employee is the only one who can make that change.
13 document, can you tell me what that document is?
13
14 A.
14 marked as the next exhibit.
Okay. Now, I have got another document that I would
It's a screen print of our banking screen in our FedEx
15 system, personnel system.
15
16 Q.
16
TI-IECOURT: 16.
17 Express?
17
18 A.
It's for Vernice B. Kuglin.
18 FedEx Direct Deposit Enb:y.)
19 Q.
Okay. And what does that document authorize or direct
And is that for any particular person at Federal
20 y'all to do?
21 A.
MR. BECRAFT: No objection, Your Honor.
19 Q.
Now, do you recall an incident where M<. Kuglin turned
20 in a W -4, but didn't sign it?

21 A.
Yes, sir.
22 Q.
Okay. Do you recall about when that happened?
23 deposited.
23 A.
It was in 2000. Probably -- well, we send out
24 Q.
Where were they to be direct deposited?
24 notification letters in December to anyone who is filing --
25 A.
To the Federal Express Credit Association.
25 who has had exempt status in the year, and we request them to
Ifs a direct deposit request to have all her wages or
22 anything that she is paid from Federal Express direct

329

330
be returned to us by February the 15th, so it would have been

2 somewhere around- from February 15th to the end of February.
Q.
2 A.
Did she say anything else?

No.
MR. MURPHY: One second, Judge, if I can look
3 Q.
Okay. Would this be for tax year 2000?
4 A.
2001.
4 at my notes, I may be done.
2001, okay. Now, did Ms. Kuglin bring in a form that
TI-lE COURT: Certainly.
MR. MURPHY: Judge, I don't have any further
Q.
6 wasn't signed or how did this - the situation arise?

7 A.
I believe she sent the form in and it was not signed.
7 questions.
8 Q.
Okay. And do the forms have to be signed?
9 A.
Yes, they do.
10 Q.
And did you talk with her about it?
10 BYMR.BECRAFT:
II A.
She did call me, yes.
II Q.
12 Q.
What did she say about the form?
12 FedEx for some period of time, is that correct?
13 A.
She wanted to know why I didn't accept it, and I told
13 A.
Yes, sir.
14 Q.
Would it be just the last couple of years?
15 to bring me a W-4 or get a W-4 that is signed in order forme
15 A.
Yes, last two years.
16 to honor it.
16 Q.
Isn't it true that as custodian of the records for the
17 Q.
17 FedEx business records that relate to withholding, you have
14 her because it wasn't signed and told her that she would have
Did she add anything else, say anything about
18 withholding?
19 A.
Not on the phone call itself, I don't think. At the
MR. BECRAFT: Briefly, Your Honor.

CROSS EXAMINATION
Ms. Edwards, you have been the head of the payroll at
18 access to all of the employees W -4 forms going back as far as

19 you keep records, is that correct?
20 meeting, when she brought me the W -4, she did.
20 A.
21 Q.
Okay. Whatdidshesay?
21
22 A.
She was very upset beca1lse we had held income tax out
22 Honor?
What's legally required, yes.

MR. BECRAFT: May I approach the witness, Your
23 of her paycheck, and she filled out the form, signed it and
23
24 said I want you to make sure you refund me my taxes, which we
24 Q.
25 did.
25 and ask you if you can identify that forme, please.
TI-IECOURT: Youmay.
rm going to show you a document, a Form W -4 dated 1995
CROSS - ELlZABETH EDWARDS

331
1 A.
It is a W-4 for Ms. Vernice Kuglin.
2 Q.
Now, when you came to court. what the government has
REDIRECT - ELIZABETH EDWARDS

332
2 BY MR. MURPHY:
3 asked you to do is to bring to court the fmms W -4 that
3 Q.
4 would- that are after that date, is that correct?
4 locating a W -4 for like '96?
A.
6 Q.
Yes.
A.
All right. And the one that you have in front of you
7 is an exempt W-4 form dated December the 30th of'95, right?

A.
9 Q.
Ms. Edwards, do you know if there were any problems
I don't know that there is a problem. Everything right
6 now is in vital records for that period of time. it's in
7 storage.
Yes, sir.
8 Q.
Do you know whether or not that is the actual Form W-4
9 refresh your recollection. I'm showing you what has been
10 that Vernice Kuglin submitted to FedEx in Decemberof'95?
Okay. I'm going to show you something, see if that may
10 marlced Exhibit 15.
11 A.
No, sir, I do not
11 A.
12 Q.
Have you ever seen that before?
12 has 1996 marked through it and 1997 written beside it, there's
13 A.
I have seen it, yes.
13 a note at the bottom that says 1996 is no longer available,
14 Q.
Do you doubt that that is the exempt W -4 form that
14 it's signed by Kim Gillum.
15 Vernice Kuglin submitted to FedEx?

16 A.
No, sir, I don't doubt it.
15
16 questions.
MR BECRAFT: Your Honor, I move the admission
17
Right, right. This particular W -4 that's marked 19 --
18 of that as the next exhibit.
THE COURT: All right. Ms. Edwards, thank you.
17
18 we will let you step down.
19
MR MURPHY: No objectioo, Your Honor.
19
20
TIIE COURT: 17.
20
THE COURT: Who will our next witness be?
21
21
MR. MURPHY: Judge, our next witness is going
22 1995 Form W-4.)
(Witness excused.)
22 to be Karlene N uby.
23
TIIE COURT: Anything else from the government?
23
24
MR MURPHY: Yes, sir, Your Honor, just one
24 please, and raise your right hand. Do you swear that the
25 question.
THE COURT: If you would step to the podium,
25 testimony you are about to give in this case will be the
DIRECT- KARLENE NUBY

334
333
truth. the whole truth and nothing but the truth, so help
KARLENE NUBY,
2 you God?
2 wa< thereupon called as a witness on behalf of the
THE WITNESS: I do.
3 Plaintiff, and having been :fiiSt duly sworn, was
THE COURT: You may have a seat up here,
5 please.
6 BYMR.MURPHY:
7 Q.
Wouldyoustateyourname,please,ma'arn?
8 A.
Karlene Nuby.
And would you spell your :fiiSt and last name for the
DIRECT EXAMINATION
9 Q.
10
10 court?
II
II A.
12
12 Y.
Sure. K-A-R-L-E-N-E. La<t name is N-U-B, a< in boy.
13
13 Q.
And who do you wotk for, Ms. Nuby?
14
14 A.
Kemper Services.
15
15 Q.
What business is Kemper Services in?
16
16 A.
Disability insurance.
17
17 Q.
Is Kemper Insurance involved in a program with FedEx?
18
18 A.
Yes, weare.
19
19 Q.
Okay. And what - briefly tell us the nature of that
20
20 program.
21
21 A.
22
22 short-leml and long-term disability for FedEx employees.
Basically, our responsibility to Kemper is to provide
Olcay. I'm going to hand you a document. Can you look
23
23 Q.
24
24 at that document and tell me what it is?
25
25 A.
It's a 1998 W-2 that was issued to Vernice Kuglin.
DrnECT- KARLENE 1\'IJBY
DrnECT-KARLENENUBY
335
Q.
2 A.
Q.
336
Okay. And could you spell the first and last name?
ll!E COURT: Cert.:l.inly.
Sure. First name is V, as in Victor, E-R-N-1-C-E --
MR. MURPHY: No further questions. Your Honor.
And what's the social security number"
MR. BECRAIT: Briefly, Your Honor.
ll!E COURT: Certainly. ru do it from here.
Q. Okay. Now, what does that particular document

4 A. -
6 indicate?
6 BY MR. BECRAFT:
7 A.
7 Q.
Basically, this document indicates that we at Kemper
Services paid to Ms. Kuglin wages in the gross amount of

9 $4,789.37. It indicates the amount of taxes that were
10 withheld for federal, social and Medicare.
II
Q.
12 A.
CROSS EXAMINATION
A.
9 Q.
Ms. Nuby, you don't know Vemice Kuglin, do you 0

No, I do not.
You just work for the insurance company that paid
10 disalbility. is that correct"
A.
What amount of taxes was withheld"
II
Federal income tax thatwaswithheldwas$1,341.03,
12 Q.
Correct.
Do you have any idea when the disability wa.< paid or
13 social security tax withheld wa.< $296.94. Medicare tax
13 what it wa.< for?
14 withheld wa.< $69.45.
14 A.
I do not know the - it was paid for short-term
15 Q.
And what was the amount of the wages 0
15 disalbility. The dates that it was paid for, I don't want to
!6 A.
The wage amount was $4,789.37.
16 take a guess at it, I believe it was some point in August of
MR MURPHY: Thank you. Your Honor, at this
17
17 '98 for approximately 14 days.

Okay. So the $4,800 that wa.< paid is for payments of
18 time we would move this into evidence as the next numbered
18 Q.
19 exhibit.
19 disalbility in August of'98"
20
MR BECRAFT: No objection, Your Honor.
20 A.
21
21
22
(Exhibit Number 18 was marlced. Description:
22 A.
23 W-2 Form.)
MR MURPHY: Judge, if I could check: my notes,
24
25 sir.
Q.
Correct.
For about some 14 days o
Correct.
23 Q.
That's your recollection?
24 A.
Yes, it is, sir.
25 Q.
And, you know, if! got the document that is no longer
CROSS-KARLENENUBY
337
338
in front of you, looked at i~ what you just said is probably
Your Honor, how late are we going to be going
2 gleaned from the document?
2 today?
3 A.
rm sorry?
4 Q.
rm sorry. L< that what that document says?
4 12:30. We're going to take a one bour lunch break.
A.
6 Q.
ll!E COURT: We're going to stop at 12:25,
That--
5 Tuesdays, Thursdays, we take a little shorter lunch break,
Let me get it for you and let me approach the witness,
6 so we will take a shorter lunch break.
7 YourHonor.
8 A.
Sure.
8 hand? Do you solemnly swear the testimony you are about
9 Q.
This Exhibit Number 18 relates to what you just told
9 to give the court and the jury to be the trulh, the whole
ll!E CLERK: Will you please raise your right
I 0 truth and nothing but the truth, so help you God?
10 us?
11 A.
Correct, sir.
ll
ll!E WITNESS: I do.
12 Q.
The $4,800 was paid for two weeks of disalbility?
12
THE CLERK You may take the witness chair.
13 A.
Correct.
13
14 Q.
In August?
14
15 A.
Of'98.
15
MR BECRAFT: Nothing further, Your Honor.
16
17
17
18
MR MURPHY: Judge, I don't have any further
18
16
I 9 questions for this witness.
20
THE COURT: All right. Thank you. We will let
19
20
21 you step down.
21
22
22
(Witness excused.)
23
23
24
MR MURPHY: It's going to be Dan Haughton,
24
25 YourHonor.
25
DIRECT- DANIEL JOSEPH HAUGHTON

340

339
DANIEL JOSEPH HAUGHTON,
mortgage interest paid?
2 A.
Yes. sir.
3 Plaintiff, and having been first duly sworn. was
3 Q.
Could you -- was it in summary form?
4 A.
Q.
DIRECT EXAMINATION
Yes.
Would you get that out. because I need-Actually. I have-- there's a computer printout from
6 BY MR. MURPHY:
6 A.
7 Q
7 our computer system that's called a transaction history
A.
9 Q.
Would you state your name. please?

Daniel Joseph Haughton.
Would you spell your first, middle and last name for
report.
9 Q.
Okay.
10 the court reporter?
10 A.
And from that report, I summarized interest payments
ll A.
D-A-N-I-E-L J-0-S-E-P-H. Haughton is H-A-U-G-H-T-0-
II over the course of the loan.
12 Q.
And who do you worlc for, sir?
N.
13 A.
Starwood Vacation Ownership, Incorporated.
14 Q.
And what business is Starwood Vacation Ownership is?
15 A.
Starwood markets and develops and sells and manages
12 Q.
If you could get your summary out
13 A.
Okay.
14 Q.
Thank you, sir.

15
THE COURT: All right
16
16 vacation ownerships or time share resorts ali over the U. S.
17 Q.
17 Q.
And bow long have you worked for the company?
18 A.
It will be five years in October.
Sir, fm banding you this document. and if you would
18 explain to us what that document is.

19 A.
19 Q.
It simply summarizes the interest paid on a -- there
Okay. And are you familiar with the records that the
20 are actually two accounts that were in the name of Vemie B.
20 company keeps?
21 Kuglin, and it summarizes the interest paid on each account
21 A
Yes, I am.
22 during the years that the account' were open, the first
22 Q.
Did you bring some record with you today that bas to do
23 account was '92, '93. '94, '95 and'%, and the second was '91
23 with a Vemice Kuglin?

24 '92, '93, '94, 95.
24 A.
Yes, I did.
25 Q.
And specifically was there a record that had to do with
25 Q.
Would that be mortgage interest"

341
CROSS- DANIEL JOSEPH HAUGHTON

342
Q.
2 Q.
Yes, sir, mortgage interest

And for 19%, what was the amount of mortgage interest
3 paid by Ms. Kuglin to your- Ms. Kugiin to your firm?

4 A.
In 1996, the amount paid was $1,047.79.

Okay. So this time share, would it be in a condo
2 somewhere in the Orlando community?

A
4 Q.
Yes,sir.
Okay. And so in October of'90 is the first time that
5 she entered into an agreement with your company to have a time
6 marked as the next numbered exhibit
6 share condo down there in Orlando?
7 A
That's correct.
8 Q.
And did she have, say,like about a week's worth of
9 Mortgage Interest Summary.)
9 time?
I0
Tiffi COURT: Cross examination?
10 A
11
MR. BECRAFT: Yes, Your Honor.
11 Q.
The first - the October of '90?
12 A
Yes, sir.
13 BYMR.BECRAFT:
13 Q.
And then a couple of years later, she entered into an
14 Q.
14 agreement to get basically another week?
12
CROSS EXAMINATION
Mr. Haughton, briefly, where are these time shares
Tbats typically the way they're sold, yes.
15 located?
15 A
16 A
16 Q.
Of time share of your condo in Orlando?
17 A
Yes, sir.
18 Hills, California and Maui, Hawaii.
18 Q.
Is there a market -- if somebody wants to get out of
19 Q.
19 these, is there a market where they can sell their interest to
We have resorts in Orlando, Florida, St. Augustine,
17 Florida, South Carolina, Beaver Creek, Colorado, Mission
All right. Do you have any idea as to when Ms. Kuglin
20 bought a time share from your company?
Yes, sir.
20 someone else?
21 A
Yes, I do.
21 A.
22 Q.
Okay. When was it?
22 people trying to sell.
23 A
Lets see, on this particular account the purchase
23 Q.
There's a market, but it is entirely saturated with
Okay. And in the -- the relationship between your
24 date is recorded a.' October the 31st. 1991, and on the
24 company and Ms. Kuglin ended, I take it, sometime in '97?
25 previous account it wa.' October the 2nd, 1990.
25 A.
The account was paid off, I believe - yeah, the
CROSS -DANIEL JOSEPH HAUGIITON

343
2 relationship becaLLc;;e --
2 band? Do you solemnly swear the testimony you are about
3 Q.
Okay.
3 to give the court and the jury to be the truth, the whole
Okay.
4 truth and nothing but the truth, so help you God?
4 A.
Q.
TilE WITNESS: I do.
So you're saying right now she bas bad-- since October
6 of 1990, she bas bad a time share even right now with your
7 company?
A.
TilE CLERK: You may take the witness chair.
Unless she bas sold it, that I'm not aware of, yes.
MR. BECRAIT: Okay. Nothing further, Your
10 Honor.
MR MURPHY: Judge, !just have one question
ll
9
10
13
ll
12
12 that I omitted.
13
14
14 BYMR.MURPHY:
15 Q.
Is mortgage interest reported to the IRS?
15
16 A.
Yes,sir.
16
17
THE COURT: All right. Thank you. We will let
19
17
18
18 questions.
19
20
20 you be excused.
21
THE WITNESS: Thank you.
21
22
(Witness excused.)
22
23
23
24
MR MURPHY: Your Honor, we call Isabelle
24
25 Baker.
25
DIRECT-~ABELLEBAKER
DIRECT- ISABELLE BAKER

345
ISABELLE BAKER.
346
l A.
They're l098s.
Okay. And do they give a figure of the amount of
2 Q.
3 mortgage interest that somebody pays over the course of a
4 year?
DIRECT EXAMINATION
6 BY MR MURPHY:
i!
344
TilE CLERK: Will you please raise your right
account was paid in full, but that doesn't necessarily end the
A.
Yes, sir.
6 Q.
Okay. Now, the first document, what year is that for?
7 Q.
7 A.
For 1999.
8 A.
Isabelle Baker.
8 Q.
And who was the person that was paying the mortgage?
9 Q.
And would you spell your flfSt name and last name for
9 A.
On the l 098, it says V emice B. Kuglin.
10 Q.
Can you spell the entire name?
11 A.
I-S-A-B-E-L-L-E B-A-K-E-R
11 A.
First name V-E-R-N-I-C-E, last name Kuglin,
12 Q.
And who do you worlc for, Ms. Baker?
12 K-U-G-L-1-N.
13 A.
GMAC Mortgage.
13 Q.
14 Q.
And what type of business is GMAC Mortgage in?
14 now is for 1999?
And what was the amount in - that sheet we're talking
Yes, sir.
15 A.
In the mortgage business.
15 A.
16 Q.
Okay. That's kind of dumb second question, wasn't it?
16 Q.
And what was the amount of the interest?
17 A.
That's all right
17 A.
Interest paid for 1999?
18 Q.
And as part of your business, do you keep records of
18 Q.
Yes, ma'am.
19 the amount of mortgage interest that people pay on mortgages
19 A.
Was $6,729.39.
20 held by your company or serviced by your company?
20 Q.
If you could llJm that over, that page over.
21 A.
Yes, we do.
21 A.
Uh-hub.
22 Q.
Okay. Does-- I'm going to show you some documents, do
22 Q.
Turn that page over and go to the second sheet.
23 you recognize those documents?
23 A.
Okay.
24 A.
Yes, I do.
24 Q.
What is the second sheet?
25 Q.
Okay. What are those documents?
25 A.
Same kind of document for the year 2000.
--------------------------------------------------------------------~~--------------------------------------------------------------------
Ll

347
Q.
2 A.
Q.
4 A.
Q.
348
MR. MURPHY: Your Honor, I don't have any
And what does it show, again?

For interest paid?
2 further questions of the wimess.
Yes, ma'am.
$7,033.28.
And for what year was lhat?
MR. BECRAFT: Briefly, Your Honor.
CROSS EXAMINATION
BY MR. BECRAFT:
6 A.
For the year 2000.
6 Q.
7 Q.
Okay. rm sorry. And who was the person that it was
7 this mortgage, you got document< for '99, 2000, and 200 1, is
M<. Baker, the interestlhat was paid by M<. Kuglin on
that correct?
issued to?
9 A.
Same person, Vemice Kuglin.
9 A.
Yes, sir.
10 Q.
Okay. And if you would go to the third document. What
10 Q.
Now, is this a mortgage in relation to some real
1 l does the third document show?
11 property, land?
It is -- I don't know whether it's land or -- I
12 A.
The same document for the year 200 l.
12 A.
13 Q.
Okay. And what does - is it issued to Ms. Kuglin?
13 guess - it must be a residence.
14 A.
Yes, sir. it is.
14 Q.
15 Q.
And how much mortgage interest does it indicate she
15 regarding what type of residence is the collateral for this
$6,690.56.
17 A.
16 paid?
17 A.
Okay. And is there some brief description there
16 particular mortgage?
18
MR MURPHY: Thank you, ma'am Your Honor. at
19 this time, we would move these three documents into
20 evidence as a collective exhibit.

THECOURT: Yes.
21
It has the address.
18 Q.
What is the address?
19 A.
200 Wagner Place, number 802, Memphis, Tennessee 38103.
20 Q.
Okay. Before 1999, did your company have any
21 relationship with Ms. Kuglin?
22
MR BECRAFT: No objections.
22 A.
rm not aware of that, sir.
23
23 Q.
Your relationship with her arose during that year of
24
24 '99?
25 A.
25 Mortgage Interest Payments.)
I can't say whether there was a relationship prior to
CROSS - ISABELLE BAKER

349
350
lhat year or not

2 Q.
Your records indicate that some time in '99, your
THECOURT: Okay.
2
THE CLERK: Would you plea.<e walk to the podium
3 company got a mortgage on her condominium?
3 and raise your right hand? Do you solemnly swear the
4 A.
Pardon me?
4 testimony you are about to give the court and jury will be
5 Q.
Your records indicate that Ms. Kuglin obtained with
5 the truth, the whole truth and nothing but the truth, so
6 GMAC a mortgage on her condominium some time, I guess, in '99?
6 help you God?
Yes, sir.
THE WITNESS: Yes.
Probably the early part of '99?
THE CLERK: You may tlke the witness chair.
9 A.
Yes, sir.
10 Q.
Okay. And it has been in effect ever since?
10
11 A.
Yes, sir.
II
12 Q.
And how much was the mortgage for when it was obtained
12
7 A.
Q.
13 sometime in early '99, if you know?

14 A.
I just show principal balance, beginning principal
15 balance. I don't have that number that you're asking me.

16
MR BECRAFT: Okay. Nothing further, Your
17 Honor.
18
14
15
16
17
19 questions.
20
13
18
19
THE COURT: All right. Thank you. We'll let
20
21 you step down.
21
22
22
(Witness excused)
23
THE COURT: Who will our next wimes.< be?
23
24
MR MURPHY: Your Honor, our next witness will
24
25 be Mr. Leporleon Pruitt.
25
DIRECT - LEPORLEON PRUITI

352
DIRECT- LEPORLEON PRUm

351
you tell me what the first document is?
LEPORLEON PRUITI.
2
WO-'
thereupon called as a witness on behalf of the

DIRECT EXAMINATION
First document is ju.<t the statement of the accounts
3 showing what they have in prime shares, that's savings, or

4 share draft, that's the checking account
5 Q.
Okay. Can you tell us -- that's a big stack of papers.
6 BY MR MURPHY:
6 whose account are we talking about there?
7 Q.
7 A
9 Q.
Would you state your name. please'

Leporleon Pruitt.
And, Mr. Pruitt. who do you work for 0
THE COURT: Let's get the spelling on that.
10
11 Q.
2 A
I'm sorry, Your Honor. How do you spell your name, Mr.
Ms. Kuglin.
Q.
Okay. Could you spell it?
9 A.
K-U-G-L-I-N.
10 Q.
What's the first name0
11 A
Vemice.
12 Pruitt?
12 Q.
Spell that, please.
13 A
13 A
V-E-R-N-I-E.
And what's the account number'
L-E-P-0-R-L-E-0-N. Pruitt. P-R-U-I-T-T.
14 Q.
Andwhodoyouworkfor?
14 Q.
15 A
FedEx Employees Credit Association.
15 A
The account number is 48512016.
16 Q.
And what business is the FedEx Employees Credit
16 Q.
Okay. What kind of account is it?

She has a prime share, that's a savings, and she has a
17 Association in?
17 A
18 A
The credit union business.
18 checking account as welL
19 Q.
Okay. And do you provide, as part of that bu.<iness,
19 Q.
Okay. And can you gjve me the dale on the first page?
20 banking service for FedEx employees'
20 A.
The dale from the statement is from February the 1st of
21 A
Yes, sir.
21 '96 to February the 29th of'96.
22 Q.
Okay. Mr. Pruitt, are you familiar with how records
22 Q.
Okay. How about the statement on the last page 0

The statement from the last page is from December the
23 are kept at your company's business?
23 A
24 A.
Yes, sir.
24 1st of 2000 to December the 31st of 2000.
25 Q.
I'm going to pass to you two sets of documents. Can
25 Q.
And are there several -- there's a number of statements
i
DIRECT- LEPORLEON PRUm
353
DIRECT- LEPORLEON PRUITI

354
in there?
THE WITNESS: Yeab, irsKuglin.
2 A
Yes, sir.
3 Q.
Okay. And these are all statements from your Credit
3 an L?
4
4 Union?
A
THE COURT: Because your fJCSt name stall-' with
THE WITNESS: Yes.
Yes, sir.
MR. MURPHY: Your Hooor, if we could have this
7 marked as a collective exhibit
THE COURT: I wanted to make sure I got it

6 spelled right.
7 Q.
And is that the document from the Credit Union's
MR. BECRAFT: No objection.
THE COURT: It will be Exhibit 21.
9 A
Yes.
10 Q.
If someone opens an account, they're required to
10
records?
11 Statement of Accounts.)
11 execute that?
12 Q.
12 A.
Now, sir, there's a second document in front of you,
13 what is that document?
Yes, sir.
13 Q.
Now, what's the date on that?
14 A
This document here is the membership application.
14 A
January the 27th of 1999.
15 Q.
Okay. Andforwho?
15 Q.
Okay. Now, the statements run before that0
16 A
Vemice Kuglin.
16 A
Right.
17 Q.
V emice what?
17 Q.
What -- why is that date <lifferent?
18 A
Kuglin.
18 A
This dale here is different because it looks like it
19 Q.
Okay. Does it appear to be Kuglin?
19 was something somebody added on the account or- yeah, it
20 A
Kuglin. yes.
20 look like somebody added on the account.
21 Q.
K-U-G-L-I-N
21 Q.
Now, when these documents were originally requested,
22
THE COURT: It's Kuglin.
23
THE WITNESS: Kuglin.
23 opening form?
24
THE COURT: It's Kuglin. It is kind of like
24 A.
25 your fJCSt name, it's confusing.
22 did you come up with the original account card, account
Now, the original account card, these going through
25 images system, but this is on the system.
DIRECT- LEPORLEON PRUITf

355

356
Q.
reference, I have got my finger on it?
Okay. The one in your band?
2 A.
Yes.
2 A.
Yes.
3 Q.
Okay. Thank you.
3 Q.
EFT Federal Express?
4 A.
Right.
MR. MURPHY: Your Honor, we would move Ibis
5 into evidence as tbe next numbered exhibit.
5 Q.
Salary, what is that in reference to?
6 A.
The EFT is tbe --it's electronic funds transfer, it's
MR. BECRAIT: No objection.
THE COURT: 22.
7 her salary.
8 Q.
Okay. And then you've got a notation of a withdrawal?
9 Application for Account.)
9 A.
Yes.
10 Q.
10 Q.
And what does tbat mean?
11 here and ask you about some entries on some of these
ll A.
That's a withdrawal that she took out on 4-15-96.

And then if you go over to Ibis account, Ibis line tbal
Now. sir, fm going to put some things up on tbe camera
12 document,. I have got a document here from exhibit -
12 Q.
13 Collective Exhibit 21. Can you see that document?
13 says change to balance where my fmger is?
14 A.
Yes, I can.
14 A.
Yes.
15 Q.
Okay. This fJrSt column, it says date, whal
15 Q.
What information does that represent?

That is representing withdrawals, money going in and
16 information is in that column?
16 A.
17 A.
4-lof'96.
17 out of the account.
18 Q.
What type of information do you put in there? Is
18 Q.
Okay. Does tbal give you tbe amount of a particular
!9 that - what dales are those?
!9 transaction?
20 A.
20 A.
Those are tbe current dales like if-- from tbe
Yes, it does.
MR. MURPHY: Judge, ifl can have one second,
21 statement, when they do any kind of transactions.
21
22 Q.
22 rm almost done.
Okay. So would that dale represent the account
23 transaction took place?
23
24 A.
Yes.
24 Q.
25 Q.
Okay. And if you go to this middle line, there's a
25 Exhibit 21. And - now, the format of these documents is a

357
THE COURT: Certainly.

358
little different. What infonnatioo is in this fust column

2 here on the left?
MR. MURPHY: Thank you, sir. One second, Your

2 Honor, rmjust about done.
3 A.
The dates- month, date and year.
4 Q.
Okay. And wbal do those dates signifY?
4 Q.
5 A.
Those dates signifY from the whole statement, from
6 November to the end of the month, and it signifies a dale that

7 a transaction bas happened.
8
Q.
Now, if you go over, there's a line, share draft to
rm going to show you another page from Collective
Mr. Pruitt, when-MR. MURPHY: Judge, I don't tbink my microphone
6 is working.
7
THE CLERK: It may need a new battery.
8 Q.
Mr. Pruitt, does your company also lend money?

Yes, sir.
9 cash disbursed, wbal type of transaction is that?
9 A.
10 A.
That's a withdrawal from her checking account
10 Q.
!! Q.
Okay. Now,just so we understand the way Ibis is
11 mortgage interest, you report the amount of the interest to
12 formatted, you have got some transactions?
Okay. Now, when-- if it involves mortgage and
12 the IRS?
13 A.
I can't see your fmger on tbat.
13 A.
14 Q.
Okay. Amiintheway?
14
15 A.
Okay.
15
Judge, I don't have any further questions.
16 Q.
There you go. Is that better?
16
17 A.
Yes.
17
MR. BECRAIT: Briefly, Your Honor.
18 Q.
Okay. Youhavegotsometransactioos tbathaveaminus
18
Yes, we do.
MR. MURPHY: Okay. One second, Judge.
I 9 symbol after them, does tbat indicate money was coming out of
19
20 the account?
20 BY MR. BECRAIT:
21 A.
Yes.
21 Q.
22 Q.
Okay. And when you have a lransaction with no minus
22 youknow?
CROSS EXAMINATION
Mr. Pruitt, when was the FedEx Credit Union started, do
23 sign behind it, for example, tbat $9,456.90, does that
23 A.
Back in 1973- '72, '73.
24 represent that money came into the account?
24 Q.
Is it your understanding that most, perllaps all of the
25 A.
25 FedEx employees are members of the Credit Union, right?
Correct.
CROSS - LEPORLEON PRUITT
CROSS- LEPORLEON PRUITT

359
A.
360
They have the -- they can join if they're a member --
A.
That. I don't know. sir.
2 if they work for FedEx. they have right to join the Credit
2 Q.
Do you lrnow anything about cars?
3 Union.
3 A.
Yes. sir.
4 Q.
Did she have any mortgages -- or did your company
4 Q.
And the services that are provided by the Credit Union
include. you lrnow. people can open up a savings account there?
5 finance any cars for her?
6 A.
Yes. sir.
6 A.
7 Q.
They can have a checking account?
A.
Yes, sir.
That, I don't lrnow. sir.

MR. BECRAFT: All right. Nothing further. Your
Honor.
9 Q.
They can obtain financing for homes and cars?
10 A.
Yes, sir.
10
MR. MURPHY: Judge. I don't have any further
11 Q.
In this particular situation, you have been asked to
II questions.
THE COURT: All right. Mr. Pruitt, thank you.
12 bring in reference -- to this particular case in reference to
12
13 M,. Kuglin, you brought in basically her checking account
13 We will let you step down.
14 stalemenL' for a number of years?
14
15 A.
Yes.sir.
15
THE COURT: Who el'e do we have?
16 Q.
And those are Exhibits 21 and 22?
16
MR. MURPHY: Judge, I have got some custodians,
17 A.
Yes. sir.
17 but I need to talk to them.
18 Q.
And so she had an account with the FedEx Credit Union.
(Witness excused.)
18
THE COURT: It's fine to take a break now.
19 oh. throughout '96?
19 think we have done pretty well. Ladies and gentlemen,
20 A.
Yes, sir.
20 we're going to take our lunch break. let you come back at
21 Q.
'97, '98, '99, all the way up to 2001, correct?
21
22 A.
Yes, sir.
22 let anybody talk with you about the case. Of course, if
I :30. Do not discuss the case among yourselves. Don't
23 Q.
Did she have any savings account"
23 anybody tries to, report that immediately to one of our
24 A.
Yes.
24 court security officers or a member of my staff or me. As
25 Q.
Did she have any mortgages with the company?
25 usual, don't speak to the parties or the lawyers in the
362
361
case and. of course, don't do any research. Don't read
2 anything or look up anything that might be about this case
2 bench.)
3 or cases like it. and continue to keep an open mind.
It's a short - it's not that long of a lunch
MR. BECRAFT: When I asked about jury
4 instructions? I thought you a.~ed if we had a disk
break, so. of course, you can -- there are a number of
available - I have got a disk of our requested
6 places to eat, and you're probably familiar with those
6 instructions.
7 already. You can go north on the mall and south, there's
THE COURT: Did you give them to us?
8 nothing really close, except the cafeteria. There are
MR. BECRAFT: I turned in my- I have got it
9 lots of places about four or five blocks south and about
9 withme.
10 three and a half, four blocks north. We will see you at
10
11 1:30.
11 guarantee you I won't use il You should have given it to
12
(Lunch recess taken at 12:30 to 1:35 p.m.)
13
THE COURT: If we have got everybody, we can
14 bring them in.
THE COURT: If you don't ever give it to me, I
12 me at the beginning of the case.

13
MR. BECRAFT: I filed my jury instructions last
14 Friday. They were filed.
15
{Jury in at I :35 p.m.)
15
THE COURT: Okay. Well--
16
MR. MURPHY: Judge, I want to alert the court,
16
.MR. BECRAFT: If you want the disk-- I
17 I think we will be done with the government's proof today.

18
THE COURT: I understlnd. I have already
19 stlrted making plans on that

20
MR. BECRAFT: The court-- I asked a couple of
21 weeks ago 22
THE COURT: Let's come to side bar if we're
23 going to talk about it

24
MR. BECRAFT: Just real quick for the benefit
25 of the court
17 delivered it to chambers.
18
THE COURT: Don't worry about it. I have got
19 the other two materials. if you will band the disk to Ms.
20 Saba, she will take care of it.
21
22 court.)
23
THE COURT: Mr. Murphy. who will our next
24 witness be?
25
MR. MURPHY: Our next witness is Mr. Alex
DIRECT - ALEXANDER RIVERA

364
363
Trivino.
TIIE COURT: Mr. Trevino, if you would step to
the podium and raise your right hand, please. That's it

4 right there. Do you swear that the testimony you are
about to give in this case will be the IIUth, the whole
ALEXANDER RIVERA
3 Plaintiff. and having been first duly sworn. was
5
DIRECT EXAMINATION
6 lnlth and nothing but the IIUth. so help you God?
6 BY MR. MURPHY:
7 Q.
TIIE WITNESS: I do, but my last name isn't
A.
Trevino, it's Rivera
Sir, would you state your name, please?

Alexander Rivern.
TIIE COURT: Well, good. rm glad
9 Q.
10
MR MURPHY: rm sorry, Mr. Rivera.
10 court reporter?
II
TIIE COURT: Mr. Rivera, do you also make that
II A.
Sure. A-L-E-X-A-N-D-E-R R-1-V-E-R-A.
12 Q.
And who do you work for, Mr. Rivera?
12 oath?
And would you spell your first and last name for the
13
THE WITNESS: Yes, I do.
13 A.
CUNA Mutual Mortgage Corporation.
14
THE COURT: I think they said Trevino, maybe
14 Q.
And what is that located?
15 I'm wrong about that.
15 A.
That is in Madison, Wisconsin.
16 Q.
Okay. And what business is C-U-N-A in?
17 down wrong.
17 A.
It's a-- CUNA Mutual Mortgage is a servicing
18
TIIE COURT: Tell me your name again.
18 corporation.
19
TIIE WITNESS: Alex Rivera.
19 Q.
Okay. And what is a servicing corporation?
20
THE COURT: Spell that last name. I will let
20 A.
We fund loans and we service those loans for investors.
MR MURPHY: Judge, I did I had it written
16
21 you get up here and we'll write it down.

22
TIIE WITNESS: It's R-1-V -E-R-A.
23
TIIE COURT: Thank you.
TIIE COURT: Just for our sake, rm going lo
21
22 make sure I have got the spelling on the name of the

23 corporation down.
24
24
TIIE WITNESS: It's C-U-N-A, CUNA.
25
25
TIIECOURT: CUNA.okay.
DIRECT- ALEXANDER RIVERA

365
DIRECT- ALEXANDER RIVERA

366
TIIE WITNESS: It stands for Credit Union

2 National Association.
3
TIIECOURT: Okay. Tbankyou.
what is that form?

2 A.
That's mortgage interest statement, a form I 098.
3 Q.
And who is it addressed lo?
4 A
Irs addressed to Vernice B. K.uglin.
5 mortgages, do you keep records of the amount of mortgage
5 Q.
How do you spell her name on the form?
6 interest payment?
6 A.
V-E-R-N-1-C-E B. Kuglin is K-U-G-L-1-N.
Yes, we do.
7 Q.
Does that show that Ms. Kuglin paid mortgage interest
4 Q.
7 A
As part of your company's activities as a servicer of
8 Q.
And did you bring some doeumenls with you loday?
8 in the year 2000?
9 A
Yes, I did.
10 Q.
Could you give me those documents?
I 0 right, Kuglin, we keep promising to do that. We will try
TIIE COURT: We're all going to work to get it
II
MR MURPHY: Thank you, sir.
II
12
MR BECRAFf: We won't have objections to these
12 A
Yes.
13 Q.
And what amount was the mortgage interest?
13 exhibits, Your Honor, for this witness, and perhaps we
to get it right. It is not always obvious.
14 oughtto put onestickeronaJI of them.
14 A
It is for $5,382.58 for the year 2000.
15
15 Q.
Do you have a form for the year 200 I?
16 A.
Yes.
17 Q.
And what's the amount of the mortgage interest?
18 making it a cumulative exhibit.
18 A.
$12,618,47.
19
19
TIIE COURT: That's-- whatever suits the
16 government.
17
MR. MURPHY: Judge, I have no objection to
TIIE COURT: Cumulative Exhibit 23, that's how
20 we're going to do it.
MR. MURPHY: Judge, at this time we would move
20 this into evidence as collective exhibit 23.
21
MR. MURPHY: Or collective.
21
TIIE COURT: Received as 23.
22
THE COURT: Collective.
22
23
(Exhibit Number 23 was marlced Description:
23 questions.
24 Mortgage Documents.)
25 Q.
Sir, I'm passing you a form that-- for the year 2000,
24
25
TIIE COURT: All right.

CROSS EXAMINATION
CROSS -ALEXANDER RIVERA

367
CROSS-ALEXANDERRIVERA
368
BY MR BECRAFT:
2 Q.
Honor?
Briefly, you brought a nwnber of records to show bow
THE COURT: Redirect"
3 much interest had been paid by Ms. Kuglin for these two years.
4 Can I ask you some questions about your general records"
A.
6 Q.
MR. MURPHY: Judge, I don't have any funher

4 questions of the witness.
Sure.
THE COURT: All right. Mr. Rivera, thanks they
Okay. Did your company, what, buy a mortgage tb;,t was
7 on some real property that was owned by Ms. Kuglin
6 very much. We will let you step down.
(Witness excused.)
THE COURT: Who is our next witness?
9 Q.
All right. And do you have a judgment or recollection
MR. MURPHY: It is going to be Jeanne Griffis
I 0 as to when !hat happened"
lO with First Tennessee, Your Honor.
II A.
The date of the loan is July of 2000.
II
12 Q.
And how much was the note that you bought0
12 hand0 Do you solemnly swear the testimony you are about
13 A.
I believe it was 156,000.
13 to give the court and jury will be the truth, the whole
14 Q.
And so some other company bad mortgaged the property
14 truth and nothing but the truth, so help you God?
THE CLERK: Will you please raise your right
15 and then your company comes along and buys that for a hundred
15
THE WITNESS: I do.
16 and fifty thousand?
16
17 A.
A hundred and fifty-six.
17
18 Q.
And !hat happened in June of2000
18
19 A.
July.
19
20 Q.
July of2000. And is it still currently a valid
20
21 mortgage?
21
22 A.
Yes.
22
23 Q.
Still in effect?
23
24 A.
Yes.
24
MR BECRAFT: All right. Nothing funher, Your
25
25
DrRECT- JEANNE GRJFF1S
DIRECT- JEANNE GRIFFIS

370
369
JEANNE GRIFFIS,
1 A.
Yes.
Now, you weren't able to get 1098s on those loans?
2 Q.
3 A.
Correct.
4 Q.
Was !hat interest income reported to the IRS?
A.
DIRECT EXAMINATION
Yes, it is.
6 BY MR MURPHY:
6 Q.
7 Q.
7 a collective exhibit, Collective Exhibit 24, and can you tell
Would you state your name, please?
8 A.
Jeam~e
9 Q.
And would you spell your fU"St name and last name for
Griffis.
Now, rm going to pass you what we're going to mark as
me what these docwnents are?
9 A.
This is a personal statement. They're personal
I 0 statements, all of them for V em ice Kuglin tb;,t shows the
II A.
J-E-A-N-N-E G-R-I-F-F-I-S.
II assets and liability of the customer.
12 Q.
Who do you work for, ='am?
12 Q.
And did those come from the loan documents?
13 A.
First Tennessee Bank.
13 A
Yes.
14 Q.
And what is your job at First Tennessee Bank?
14 Q.
Okay. And those were made in coonection with the
15 A.
I'm manager of legal services and ten compliance
15 loans?
16 departments.
16 A.
17 Q.
And are you the records custodian?
17
18 A.
Yes,Iam.
18 marlced as a collective exhibit.
19 Q.
Now, some inquiry was made about whether a Vernice B.
20 Kuglin had some loans with First Tennessee Bank.
Yes.
MR MURPHY: Your Honor, if we could have this
19
THECOURT: Exhibit24.
20
21 A.
Yes.
21 Loan Documents.)
22 Q.
Okay. Did you check the records?
22
23 A.
Yes, I did.
23 questions for Ms. Griffis.
24 Q.
Okay. Now, were there loans that she had with First
24
25 Tennessee Bank?
25
MR MURPHY: Judge, I don't have any funher
THE COURT: All right Cross examination?

CROSS EXAMINATION
CROSS - JEANNE GRIFFIS
CROSS - JEANNE GRIFFIS
372
371
BY MR BECRAFT:
Q.
THE COURT: Thank you very much.
M. Griffis, does your bank at the present time have a
3 mortgage on any property of Ms. Kuglin?
4 A.
Q.
I don't know.
(Witness excused.)
MR. MURPHY: John Scobey, Your Honor.
All right. Are you familiar with some property called
THE COURT: If you would step to the podium,
6 One Main South?
6 please, and raise your right hand.
7 A.
No.
8 Q.
How about 802 at Waterford Plaza condominium?
8 please? Do you solemnly swear the testimony you are about
9 A.
No, I would not be familiar with those properties.
9 to give the court and the jury will be the truth, the
10 Q.
Has your bank at any time in the past, say, like, since
l 0 whole truth and nothing but the truth, so help you God?
ll
1990 forward held any mortgage on property owned by V ernice
12 Kuglin?
13 A.
ll
THE WITNESS: I do.
12
The mortgage is a separate entity. The mortgage
l3
14 company is separate from the bank. Now, we had several loans
14
15 for Ms. Kuglin, but whether they were secured as a second
15
16 mortgage, without looking at them, I can't tell you.
16
17 Q.
17
Okay. The only thing that you know about as manager of
18 legal services are these applications that we have just
19 submitted, right?
20 A.
THE CLERK: Will you raise your right hand,
18
19
Well, I know there are loans for Ms. Kuglin or there
21 were loans, yes.
20
21
22
MR BECRAFT: Nothing further, Your Honor.
22
23
23
24
MR MURPHY: Your Honor, I don't have any
24
25 further questions.
25
DIRECT- DAVID SCOBEY
DmECT-DAVIDSCOBEY
373
374
DAVID SCOBEY,
of years where you got a summons from the Internal Revenue
2 Service requesting records having to do with Ms. Kuglin's
3 property?
4 A.
Yes, we did. I believe it was in October of 200 L
5 Q.
Okay. And did you call Ms. Kuglin about those records,
DIRECT EXAMINATION
6 BY MR MURPHY:
6 about that documents request, rather?
7 Q.
Would you slate your name, please?
7 A.
8 A.
David Scobey.
8 her know that we had got a s\IIIDilons or subpoena and that I
9 Q.
And would you spell your flfSt and last name, please,
10 sir?
II A.
I called M. Kuglin just simply as a courtesy to let
9 thought we would have to comply.

10 Q.
Okay. And what did Ms.- what was M. Kuglin's
David, D-A-V-I-D. Last name Scobey, S-C-0-B-E-Y.
II response to that?
12 Q.
And who do you worlc for, sir?
12 A.
13 A.
Henry Turley Company.
13 the summons was faulty or not valid and that she would have
14 Q.
Mr. Scobey, do you go by the name of John?
14 her lawyer contact me to, you know, to give his opinion on the
15 A.
I do go by the name of I ohn.
15 matter.
Her response was that she was under the opinion that
16
THE COURT: That's confusing to me.
16 Q.
17
THE WITNESS: Well, that's my middle name.
17 the subpoena?
Okay. Did she indicate whether you had to comply with
Just that it was her opinion that it was faulty and I
18 DavidJ.
18 A.
19 Q.
19 would not have to comply.
Mr. Scobey, have you had some dealings with an
20 individual named V ernice Kuglin?
20
21 A.
Our company has.
21
No further questions, YourHonor.
22 Q.
And specifically why has your company had dealings with
22
MR.MURPHY: Okay. Onesecond,YourHonor.
23 Ms. Kuglin?
23
24 A.
We sold her a condominium unit down on South Main.
24 BY MR. BECRAFf:
25 Q.
Did there come a point in time within the last couple
25 Q.
CROSS EXAMINATION
Mr. Scobey, the relationship between, is it the Turley
CROSS - DAVID SCOBEY
CROSS-DAVIDSCOBEY
376
375
A.
Company?
That's correct.
2 A.
The Henry Turley company.
2 Q.
3 Q.
The Henry Turley Company. At one time that company
3 this particular lrllnsaction, the purchase from Mr. Turley by

4 her of that unit that she bought in '93?
4 owned some property on South Main?
5 A.
It did. It still does. Actually, the company
doesn~
6 but Henry Turley, our shareholder, does.

7 Q.
A.
So you have a number of records that would relate to
And it's a two-story building out here on Main Street?
5 A.
Correct.
6 Q.
And so in October of 2001, somebody from the IRS got in
7 touch with you and delivered a summons wanting all of the

financial records regarding Mr. Turley's association or Turley
That's correct.
9 Q.
A couple of blocks down from this courthouse?
9 Company's a.<sociation with Ms. Kuglin, L< that correct"
lO A.
Correct.
10 A.
That's correct.
11 Q.
Somewhere around '92, '93, is that about the time frame
ll Q.
Did you meet Ms. Deborah White on that occa.<ion?
12 in which Mr. Turley sold or conveyed some interest in the
12 A.
I did.
13 property to Ms. Kuglin and her son, Christopher?
l3 Q.
Wa.< she the party that delivered the summons to you?
14 A.
!twas in March of'93, we sold a unit in a condominium
14 A.
She was.
15 to Ms. Kuglin.
15 Q.
Okay. I take it your company has done thL< in the
16 Q.
16 past" You know, the IRS comes along and a.<ks for some
And so since that time, there have been periodic
17 paymen1s made by either Ms. Kuglin or her son regarding the
17 information, right?
18 amounts that would be owed to Mr. Turley for the purchase of
18 A.
Well, in my fifteen years, this was the first time.
l 9 that property?
19 Q.
How often have you talked to Ms. Kuglin since she ha.<
20 A.
She had a promissory note at the closing, which she has
20 bought this property from Mr. Turley?
21 subsequently paid off, and since then, they have been paying
21 A.
22 condominium maintenance fees to the condominium association,
22 very infrequent.
rve probably spoken to her two or three times. It's
23 which we manage.
23 Q.
Would it relate to this property?
24 Q.
24 A.
It related to this property.
25 Q.
Did she ever make any comments to you about tlxes?
Well, the condominium, basically? It's a two-story
25 building, and the top story is all hers, right"
CROSS-DAVIDSCOBEY
CROSS-DAVIDSCOBEY
377
l A.
No.
2 Q.
She has never discussed her position with you about
378
phone, did you provide a copy of that summons to Ms. Kuglin
2 before you talked to her about it"
3 federal income taxes?
A.
I don't recall.
MR. MURPHY: Judge, I object to hearsay.
4 Q.
THE COURT: Objection sustained.
5 likely that you did not give her a copy of it?
6 Q.
Now, on this particular occasion, when Ms. White
7 delivered the summons to you in October of200l, you read the
Okay. Well, is it likely that you- or is it more
MR. MURPHY: Judge,
rm going to object to the
7 question because I think the witness has said he doesn't
8 summons over, correct"
8 know.
9 A.
I did.
THE COURT: Well-
10 Q.
And do you have an in-house lawyer in the company?
10
MR. BECRAFT: I'll withdraw it, Your Honor.
11 A.
No, no.
11
THE COURT: Beyond the personal knowledge --
12 Q.
Do you have private counsel?
12 well, he has already said what he had to say about that.
13 A.
Yes, we do.
13 Objection sustained.
14 Q.
Once of the ftrst things you did when you received the
14 Q.
And when you picked up the phone and called Ms. Kuglin,
15 summons, you picked up the phone and called Ms. Kuglin?
15 you said, in essence, that a summons had been requesting
16 A.
That's correct.
16 certain ftnancial information from the Turley Company. right?
17 Q.
And she had a position?
17 A.
That's correct.
18 A.
She did.
18 Q.
And you informed her that it was the IRS that was
19 Q.
And she believed - at that point in time, had she seen
19 wanting it, right"
20 the summons?
20 A.
!did.
21 A.
I have no idea.
21 Q.
And she told you that-- did you tell her much about
22 Q.
Well, the amount of times- was the summons delivered
22 the facts of the summons, how it was delivered to you, what it
23 to you personally?
23 requested?
24 A.
!twas.
24 A.
25 Q.
Okay. And did you provide- before you picked up the
25 indicated that similar documen1s had been delivered to others.
I don't remember that I did tell her very much. She
CROSS-DAVIDSCOBEY
380
379
Q.
Okay. And she did tell you that she had a lawyer that
A.
rnE COURT: That's no problem
2 would respond, is that correct"

That he would give his opinion to me on why thai she
4 didn't feel that I had to comply.
MR. MURPHY: Your Honor, the government calls
3 Special Agent Debbie White.

4
lliE CLERK: Will you please raise your right
Okay. And do you know who this lawyer was"
5 hand" Do you solemnly swear the testimony you are about
6 A.
I believe his name was Baxley.
6 to give the court and the jury will be the truth, the
7 Q.
From Florida"
7 whole truth and nothing but the truth, so help you Gnd.
Q.
I don't recall.
lliE WITNESS: Yes, I do.
Okay. Do you recall having received al some time
lliE CLERK: You may take the witness chair.
I 0 shortly after or within a reasonable time after October of
10
MR. BECRAFT: May it please the court, can I
II 200 I, that Mr. Baxley, in fact, contacted you and sent you
II take up one matter right now at side bar?
12 something about the summons?
12
A.
9 Q.
13 A.
He did send me a letter.
lliE COURT: Sure. I'm going to ask you your
13 first name is?
14
MR. BECRAFT: Nothing further, Your Honor.
14
15
MR. MURPHY: Your Honor, I don't have any
15 W-H-1-T-E.
lliE WITNESS: Deborah, D-E-B-0-R-A-H, White,
16 further questions ofMr. Scobey.
16
lliE COURT: Thank you.
17
17
(The following proceedings had al side-bar
THE COURT: Thank you. We will let you step
18 down.
18 beneh.)
19
(Witness excused.)
MR. BECRAFT: This is not something we
19
20
21
MR. MURPHY: Our next witness is going to be
20 necessarily called to the altention of the court. but, you

21 know, I haven't formally invoked the rule, but --
22 Special Agent Deborab White, but I need to let a witness
22
MR. MURPHY: This is the last witness.
23 go.
23
MR. BECRAFT: I know, but thai'srnE COURT: The rule has now been invoked, it
24
THE COURT: Okay.
24
25
MR. MURPHY: If[ could have one minute.
25 wasn't invoked earlier by anybody. Now, it is invoked.
DIRECT- DEBORAH WHITE

381
382
MR. BECRAFT: Okay. I was told by Ms. K.uglin,
DEBORAH WHITE,
2 the red headed lady in the back of the courtroom may be a
2 wa. thereupon called as a witness on behalf of the
3 witness.
MR. MURPHY: rm not going to call her.
MR. BECRAFT: Oh, you're not?
MR. MURPHY: rm not going to call her.
6 BY MR. MURPHY:
MR. BECRAFT: Sorry, Your Honor. That's okay.
7 Q.
Ma'am, would you state your name, please?
8 A.
Deborah White. It's D-E-B-0-R-A-H W-H-1-T-E.
9 court.)
9 Q.
Who are you employed by, Ms. White?
10
10 A.
11
II investigation.
DIRECT EXAMINATION
rm employed by the Internal Revenue Service, criminal
12
12 Q.
13
13 A.
rm a special agent
14
14 Q.
And how long have you been a special agent with the
15
15 Internal Revenue Service?
In what capacity"
I have been a special agent for about nine and a half
16
16 A.
17
17 years.
18
18 Q.
19
19 Ms. Kuglin's tax situation?
20
20 A.
Yes, I was.
21
21 Q.
Okay. And did you do a calculation to determine
22
22 whether any income taxes were due and owing?
23
23 A.
Yes, I did.
24
24 Q.
Okay. Now, in order to do that caleulation, what
25
25 records did you use?
Okay. Now, were you involved in the investigation of
DIRECT - DEBORAH WHITE
DIRECT - DEBORAH WHITE
384
383
A.
I used the 1RP documents which contained-- and
copy.
TI-lE COURT: Well, fillet them use the form
2 summoned reconls that we got from Federal Express and Kemper
3 National Semces, and that's basically it. Well the
3 they have got, and we might use the letter size also as an
4 mortgage interest that she was paid - or that she paid.
4 exira exhibit, so that we can more easily fit it in the
Q.
record.
And some of the -- did you get the mortgage interest
MR. MURPHY: The problem with the letter size
6 figures off of some of the 1098s that you were able to get and
7 some of it off the IRPs?
7 one for the jury to see, they kind of have to go like
A.
that.
Right. I got most of the information off the IRPs.
MR. MURPHY: Your Honor, if we could set the
TI-lE COURT: I understand. That's no problem.
10 easel up, we have got a calculation.
10
MR. MURPHY: It is kind of a long deal. Okay.
11
THE COURT: That's fine.
ll
TI-lE COURT: That may need to be lifted up. And
12
MR MURPHY: If the witness could come down.
12 there is a way to do that. I tell you wha~ though, would
l3
THE WITNESS: And bring your papers with you.
13 you move it around so it is a little more in the corner so
14
THE COURT: It's okay also if you want to use
14 that I can see it and everybody has a shot at seeing it?
15 the overl!ead, whichever you want - okay, you have got it
15 And why don't we put the letter size one on the overl!ead,
16 on chart, that's fine.
16 anyway, if we have got one, counsel.

17
MR. MURPHY: Yes, sir.
18 overl!ead, but making it all fit is kind of han!.
18
TI-lE COURT: Mrs. Saha, we want the letter sized
19
19 one on the overhead also.
MRMURPHY: Judge, we would have put it on the
17
THE COURT: That's no problem at all. But we
20 do have to let defense counsel have a chance to come
20
21 around to see.
21 we're going to show it to the panel.
MRBECRAFT: I have looked at it already, Your
22
And we probably ought to give it a number if
MR. MURPHY: Judge, what if we numbered the
22
23 panels two separate numbers and make that a third number.
23 Honor.
24
THECOURT: Okay.
24
TI-lE COURT: !twill be 25, 26, 27.
25
MR BECRAFT: I do believe I have a letter size
25
I
Ii

386
385
Chart.)
I
I
self-employment tax, stuff like that
3 Chart.)
Paper Copy of Charts.)

TI-lE COURT: The charts are 25 and 26.
6
7 Q.
2 Q.
3
Now, Ms. White, are these two panels that we have
TI-lE COURT: You have the wrong one on the
4 screen. I tell you what, I'm going to take a two or

5 three-minute break, let y'all take a real short break, let
6 these folh get a little more organized and we will come
7 back. Thank you.
8 marked Exhibits 25 and 26, are these blowups of the tax
9 ealculation you prepared?
And what was the adjusted gtoss income?
(Recess taken atl:55 until 2:08p.m.)

9
THE COURT: It's really easier for some jurors
10 A.
Yes, sir, they are.
10 to see the screen no matter where we put the overl!eads.
ll Q.
Let's start with this one first. Now, for 1996, the
ll So that also lets me see it. I have a lot of !rouble
12 year 1996, what did you compute Ms. Kuglin's wages as0
12 seeing that far, just to be honest.
MR. MURPHY: I think if! ever have one of
13 A.
For 1996?
13
14 Q.
Yes~
14 these cases again, rii do tax computations for everybody
15 A.
The wages that she received were from Federal Ex -
ma'am.
15 in the courtroom, and we could -
16 Federal Express, and they were in the amount of$183,408.01.
16
17 Q.
17 just knew we needed to give you a break so we wouldn't
And what was the Iota! of all wages she received in
TilE COURT: Oh, this is fine. This is fme.
18 1996?
18 have everything falling down.
19 A.
$183,408.01.
19
MR. MURPHY: I apologize.
20 Q.
And were there any adjustments to the income?
20
TI-lE COURT: No problem. I think we're ready to
21 A.
No, there were not.
21 go, Mr. Tuggle.
22 Q.
What are adjustments to income?
22
23 A.
A4justments to income are those item. on the front of
23 jurors can see it a little bit? It think we're where
Are you going to move that other chart so the
24 the return. They primarily deal with, like, for self-employed
24 people can see now, and thafs better.
25 people where you get a credit for like half a year
25
You have a monitor over there too?
DIRECT- DEBORAH WliTTE

387
MR. BECRAIT: Yes. I don't need to look at
388
Q.
Was there some formula you used to determine that?
2 that, I have a hard copy.
2 A.
3 out after a certain income level, and so in your 1040 tax
TilE COURT: I understand, I understand.
4 think we're all set, Mr. Tuggle.
Yeah, just the -- the itemized deductions are phased
4 booklet, there's like a little calculation sheet that you use,
COURT SECURITY OFFICER: All right, Judge.
you know, it just kind of gives you the formula for
(Jury in at 2:10p.m.)
6 determining what your deduction would be.
TilE COURT: I hope y'all appreciate it, when
7 Q.
8 somebody can't see very well, nothing is more frustrating
And did you use that to determine the amount of
8 itemized deductions for '96, that little chart?
9 for me than to lry to see something and I can't see it.
9 A.
Yes,Idid.
I 0 So hopefully you're all able to see things now, it is real
10 Q.
Okay. And did you also determine the amount of the tax
11 important, and I think we're ready to proceed.
II exemption for Ms. Kuglin?
MR MURPHY: Yes, sir, Your Honor.
12
13 Q.
Now, Ms. White, we were going through the tax
12 A.
Yes. I did. Her exemption-- we gave her one exemption
13 for herself, and the exemption amount was $1,173.

Did you ai<;O use some formula that was provided in the
14 calculation, and basically, we're talking about what has been
14 Q.
15 marked as Exhibit 25, and the 1996 year, what was the adjusted
15 1040 tax manual to determine the amount of exemption?
16 gross income you came up with for that year?
16 A.
17 A.
The adjusted gross income for 1996 was $183,408.01.
17 income.
18 Q.
And did you determine whether Ms. Kuglin was entitled
I 9 to any itemized deductions?
18 Q.
Yes, it it's the same type formula that's based on your
Okay. Now, going over to- if we could put chart two
19 on the screen. For 1996, what was the corrected taxable
20 A.
On the itemized deductions, yes.
20 income?
21 Q.
Okay.
21 A.
For 1996, her corrected taxable income was $162,883.75.
22 A.
I concluded that.
22 Q.
And what was -- did you compute the tax?
23 Q.
Okay. And what was the amount of those itemized
23 A.
Yes, I did.
24 deductions?
24 Q.
And what was the tax?
25 A.
25 A.
The tax was $47,708.65.
The amount of those itemized deductions was $19,351.26.
I

389
Q.
Okay. In 1996, what was the amount of income that
2 triggered the filing m:juirement?

3 A.
For I 996, you had to have gross income equal to or in
4 excess of $6,550 in order to have a requirement to file a
390
Q.
Now, were there any taxes withheld from FedEx in '96,
2 according to your investigation?

3 A.
In 1996?
4 Q.
Yes, ma'am.
5 return.
5 A.
No, sir.
6 Q.
And what is gross income?
6 Q.
Okay. Going over-- now, one more thing before we go
7 A.
Gross income, it's basically all items of income from
7 to the next year, on your initial computation, was there a
whatever source derived.
8 mistake made?
9 Q.
Okay.
9 A.
I 0 A.
All monies.
10 talk-
II Q.
Now, in order to trigger the filing m:juirement- the
12 fL!ing requirement, do you - before you determine, do you
When I initially prepared our - can I back up and
11 Q.
Sure.
12 A.
-kind of how the process we go through?
13 subtract the deductions and all that?
13 Q.
Yes, sir.
14 A.
I'm sorry, go ahead.
14 A.
When we recommend prosecution when we work our
15 Q.
The fLling requirement, the minimum dollars that
15 investigation, we go out and gather the facts. !fit deems
16 require filing -
16 that prosecution is warranted, we write up a prosecution
17 A.
Ub-huh.
17 report and altacb - which is just a long nanative report
18 Q.
-- thars for what?
18 that reports what our findings are. Altached to that would be
19 A.
That's your gross income.
19 the exhibits which are, you know, items, bank records, stuff
20 Q.
Okay. Okay. And that's-
20 like that that we get throughout the investigation that help
21 A.
Your gross income should be equal to or greater - if
21 prove our case. Anyway, we put them all together in a binder,
22 it's equal to or less than that.
22 and we have an agent in - for Memphis, be's actually located
23 Q.
Less than what?
23 in Arkansas, be reviews all our cases, and does our
24 A.
Than the $6,550, then you're not m:juired to file a tax
24 calculations and makes sure that everything is correct, and at
25 return.
25 that point, I bad actually made an error on my, I think it was
DIRECT- DEBORAH WJITTE
392
391
my exemption chart, I was supposed to round up, and I didn't
l $172,674.3 7.
Okay. And did you give her credit for itemized
2 round at all. So that made a difference like in the taxable
2 Q.
3 income and all that. So he sent it-- when it came back to
3 deductions?
4 me, I corrected it. These are lbe correct numbers, but I
4 A.
Yes, I did.
5 forgot when I printed out lbe new worksheets, I didn't swap
5 Q.
In what amount?
6 them out in the exhibits. So these are the correct numbers.
6 A.
$23,137.77.
7 And when my case went forward, it had the incorrect
7 Q.
Were her itemized deductions limited because of her
8 calculation on the exhibits. And I think lbe incorrect
income or anything like that?
9 numbers were actually provided to the defense during the
9 A.
Right, right.
l 0 discovery process, and we -- before we realized that I hadn't
10 Q.
Okay. Did you also give her an exemption?
ll swapped them out. That's kind of the error.
ll A.
Yes, I did. It totaled $1,537.
12 Q.
12 Q.
Okay. And what was her corrected taxable income?
But that error was corrected?
13 A.
Yes.
13 A.
$147,999.60.
14 Q.
Okay. Let's talk about 1997. What wages based on your
14 Q.
If we could go to page two, what was the corrected
15 investigation did M<. Kuglin have before in 1997, and we're on
15 taxable income for 1997?
16 ch:Jrt one.
16 A.
$147,999.60.
17 A.
17 Q.
And what was the tax per the tax rate schedule?
Okay. Her wages forl997 consisted of her W-2 wages
18 she received from Federal Express. Her wages for the year
18 A.
$42,050.36.
19 were $172,674.37.
19 Q.
And that's - what bracket was Ms. Kuglin in, in terms
20 Q.
Okay. And what was her corrected total income?
20 of was she single or head of household?
21 A.
Thatsameamount,$172,67437.
21 A.
Single.
22 Q.
Were there any adjustments to her income?
22 Q.
Single. Based on your investigation, did she have aoy
23 A.
No, sir.
23 dependents at the time?
24 Q.
What was her adjusted gross income at that point?
24 A.
No.
25 A.
Her adjusted gross income was the same amount,
25 Q.
Okay. Now, in 1997, what was the minimum amount of

394
393
income that triggered a filing requirement?
l A.
$1,728.
If we could shift over to page two. And what was Ms.
2 A.
$6,800.
2 Q.
3 Q.
Let's go over to l999,pageoneofthech:Jrt. Did Ms.
3 Kuglin's corrected taxable income for 1998?
4 Kuglin- Ms. Kuglin receive wages from Federal Express?
4 A.
Her corrected taxable income was $137,197.93.
5 A.
Yes, she did.
5 Q.
Did you determine what the amount of tax would be on
6 Q.
And what was the amount of the wages?
6 that amount?
7 A.
For 1998?
7 A.
8 Q.
Yes,ma'am.
8 determined that it was $37,000--$37,848.75.
9 A.
The wages from FedEx were $164,196. She also received
l 0 that short-term disability pay from Kemper National Services

ll in the amount of $4,789.37.
9 Q.
Yes, I did. I used the tax Jate schedule and
Okay. And did Ms. Kuglin receive any credits for taxes
lO that were withheld?
ll A.
Yeah, I credited back the-- when she filed the claim
12 Q.
And what was her total adjusted gross income?
12 with Kemper, when Kemper paid her, they withheld taxes from
13 A.
$168,98537.
l3 her disability benefit in the amount of$1,341.03, and I
14 Q.
And what were the amount of itemized deductions that
14 subtracted that.
15 she received credit for?
15 Q.
16 A.
$30,059.44.
16 according to your calculation?
17 Q.
And were those- the amount of those deductions
And what was the amount of tax due and owing per 1998,
17 A.
Itwas$36,507.72.
18 limited?
18 Q.
And I might have asked this already, what was the
19 A.
Yes.
19 income level that triggered the filing of a tax return in
20 Q.
And did you use the tax calculation table for that?
20 1998?
21 A.
Yes, I did.
21 A.
$6,950.
22 Q.
Let's talk about her exemption, how many exemptions did
22 Q.
If we could go to page one again. I would like to talk
23 she get for 1998?
23 now about 1999.
24 A.
Just one for herself.
24 A.
Uh-huh.
25 Q.
And what was the amount of that exemption?
25 Q.
Did Ms. Kuglin receive any wages in 1999?

396
395
A.
In 1999, she received W -2 wages from Federal Express in
Q.
And what was your computation of the tax due and owing?
2 the amountof$172,428.80.
2 A.
The tax due and owing was $41,032.30.
3 Q.
Okay. And were there any adjustments to her income?
3 Q.
If we could go back to page one, please. Did Ms.
4 A.
No.
4 Kuglin receive wages in 2000?
5 Q.
What was her adjusted gross income then?
5 A.
6 A.
$172,428.80.
6 in the amount of$191,292.99.
7 Q.
And did she receive - did you give her credit for
7 Q.
And what was her corrected total income then?
8 A.
Her corrected total income was $164,000 -
8 itemized deductions?
Yes, she did. Again, they were just wages from FedEx
9 A.
Yes, I did. in the amount of$24,152.14.
9 Q.
No, this is for 2000.
l 0 Q.
Were those deductions limited because of her income?
10 A.
rm sorry, her corrected total income, rm sorry,
ll A.
Yes.
ll $191,292.99.
12 Q.
Okay. And did you give her an exemption?
12 Q.
13 A.
Yes, I did. For 1999, she got $1,705 as a personal
And what was her adjusted gross income?
13 A.
Her adjusted gross income was the same amount.
14 exemption.
14 Q.
Did you allow her any itemized deductions?
15 Q.
And was that limited because -
15 A.
Yes, again, we allowed her the itemized deductions for
16 A.
Because of the amount of income.
16 her mortgage interest that she paid in the amount of
17 Q.
--of the amount of income?
17 $25,668.71.
18 A.
Uh-huh.
18 Q.
19 Q.
If we could go over to page two. For 1999, what was
19 the-
And were those deductions limited by the tax table or
20 Ms. Kuglin's corrected taxable income?
20 A.
Yes.
21 A.
21 Q.
Or by her income, rather?

By her income.
Her corrected taxable income was $146,571.66.
22 Q.
What was her tax per the tax table?
22 A.
23 A.
Per the tax rate schedule?
23 Q.
And did you - did she receive credit for an exemption?
24 Q.
Yes, ma'am.
24 A.
Yes, she did. In 2000, her personal exemption was
25 A.
It was $41,032.30.
25 $1400.

397
Q.
398
Q.
And, again, was that limited by her income?
And was she credited with a personal exemption?
2 A.
Uh-huh.
2 A.
Yes,herpersonalexemptionfor2001 was$1,508.
3 Q.
Now, if we could go over to page two. What was her
3 Q.
What was her corrected taxable income?
4 corrected taxable income for 2000?
4 A.
$161,189.07.
For2000. itwas$164,224.28.
5 Q.
If we could go over to page two. For 2001, what was
6 Q.
And what was the tax per the tax rate schedule?
6 Ms. Kuglin's carected taxable income? Again, I'm going right
7 A.
$47,171.74.
7 down the chart?
8 Q.
And what was the tax due and owing based on your
A.
8 A.
$161,189.07.
9 calculation?
9 Q.
And what was her tax per the tax rate schedule?
10 A.
$47,171.74.
10 A.
$45,036.87.
ll Q.
Okay. And could we go back to page one, please?
11 Q.
What was her- based on this calculation, what was her
12
Now, referring to 2001, did Ms. Kuglin receive any
12 tax due and owing?
13 wages fromFedEx?
l3 A.
$45,036.87.
14 A.
Yes, her Federnl Express wages totaled $190,673.37.
14 Q.
And other than the Kemper withholding in 1998, was
15 Q.
And what was her corrected total income?
15 there any withholding that reduced her tax liability that you
16 A.
$190,673.37.
16 were able to--
17 Q.
And what was her adjusted gross income?
17 A.
18 A.
$190,673.37.
18
19 Q.
And there were no adjustments to income?
19 Q.
20 A.
No.
20 know the charts are in your way, is she in the cowtroom
21 Q.
And what-- was Ms. Kuglin credited with itemized
No, there was not
MR. MURPHY: One second. Judge.

One more thing. The Ms. Kuglin you investigated, and I
21 today?
22 deductions for 2001?
22 A.
Yes, she is.
23 A.
Yes, she was.
23 Q.
Okay. Where is sbe seated and what is she wearing?
24 Q.
And what were the amount of those deductions?
24 A.
Sbe is seated between the two gentlemen with an orange
25 A.
$27,976.30.
25 jacket on.
CROSS- DEBORAH WHITE
400
399
MR. BECRAFT: We will stipulate she has
Q.
So by the time you graduated, what, in '85, at the
2 identified her, Your Honor.
2 place in Huntsville, Texas --
3 A.
THE COURT: The defendant has been identified,
4 and thafs reflected in the record.
No, I graduated in '90. It was on an extended plan.
4 Q.
I see. So you went to work for the IRS in '85?
5 A.
I went to work for the IRS in '85, and I was in college
6 questions for Special Agent White.
6 in the evening and --
7 Q.

CROSS EXAMINATION
A.
Okay. Good enough. But that was in criminal justice?

Right.
9 BY MR. BECRAFT:
9 Q.
10 Q.
10 agent, is that correct?
Good afternoon, Ms. White.
You apparently obviously had designs on being a special
ll A
Good afternoon.
11 A.
That's correct.
12 Q.
I believe you testified that you had been working with
12 Q.
And- but your college courses didn't deal anything
13 the IRS for the last nine and a half years, correct?
14 A.
I have been a special agent for the last nine and a
13 with necessarily tax and accounting, did it?

14 A.
My -- I mean I took tax and accounting courses at
15 half years. I have been employed with the IRS since 1985.
15 college, if that's what you are talking about.
16 Q.
16 Q.
Okay. Could I get a little bit of your educational
Okay. Good enough. Now, those courses involved going
17 to like a class in the evening, you said you were-- so you
17 background, please?
18 A.
Sure.
18 might go Monday, Wednesday, Friday or Tuesdays and Thursdays
19 Q.
Where did you go to school?
19 or some such, you might go and sit in the class for several
20 A.
College, I have a bachelor's degree from Sam Houston
20 hours, correct?
21 State University in Huntsville, Texas in criminal justice.
21 A.
Right.
22 Q.
Do you have an accounting background?
22 Q.
To learn accounting and tax?
23 A.
I have the accounting classes -- in order to become a
23 A.
Right.
24 special agent with IRS, you have to have a bachelor's degree
24 Q.
Okay. Now, since you have been working for the IRS,
25 and 15 hours of accounting.
25 have you gone to specialized schools that relate to accounting
CROSS -DEBORAH WHITE
402
401
and taxes?
2 A.
When you get hired as a special agent. you attend the
Treasury Department and other - I think the only ones that

2 don't go there are FBI agents and DEA agents, the rest of them
3 federal law enforcement training center dnwn in - it is in
3 all attend that - everybody takes that class. And then we
4 Brunswick- Glynco, Georgia. I was down there for like six
4 had a tax class and then we had -- we fmished out with the
months.
5 special agent investigative techniques, which is the course
6 Q.
And did you learn more about taxes down there?
6 that teaches you how to do the IRS special agent job.
7 A.
Yeah, that school -- that six-month school, it is split
7 Q.
up into three different schools. One is criminal investigator
All right. And since you have been to Glynco, that
8 would be sometime maybe the late 1980s, early 1990s?
I got out in-- I went down there in January of '94,
9 training, one is tax, and the other is special agent
9 A.
10 investigative techniques.
10 and I got out in June, July.
11 Q.
I want to get an idea about how much study-- you
12 obviously recognize this, I hold in my hand, 1986 Internal
11 Q.
Okay. And since you got out of that course, have you
12 had, you know, kind of refresher cowses or continuing
13 Revenue Code printed in 1994, right?
13 education courses that relate to tax?
14 A.
Right.
14 A.
15 Q.
And throughout this trial, Mr. Murphy- oh, no, thaes
15 professional education that's put on, by- in the criminal
We have - every year, we have a continuing
16 not - but you had here in the courtroom Internal Revenue
16 investigation area, and we roughly have it every year. I mean
17 codes and other tlx information with you, correct?
17 if there's updates that. you know, we need to be, you know
18 A.
Yeab.
18 aware of, or whatever, there would probably be a course
19 Q.
Okay. Now, the courts that you have taken in special
19 presented on that. But generally, the cases that we work
20 agent-- I think you said you went down to Glynco, Georgia and
20 aren't current year cases, they're usually -- we have to give
21 had at least a six-100nth course on tlx?
21 you time to file or not file, or, you know, so it is-
22 A.
No, I said that we had -- it was split into three
22 they're usually prior years.
23 different cowses. The criminal investigator training is the
23 Q.
24 fD"St, you know, five or six weeks, and that basically teaches
24 study of federal income taxes is complicated?
25 you about the law. Basically, all federal agents within the
25 A.
Now, would you disagree with me when I say that the
Sure.

403
Q.
404
MR. BECRAFf: She bas bad training, Your Honor,
Now, in addition to knowing something about-- we don't
2 have your copy of the Internal Revenue Code here, but you use
2 I just simply want to know--
3 books like this in your regular work, right, the Internal
MR. MURPHY: You still don't have it off.
4 Revenue Code?
MR. BECRAFf: All I wanted to do, Your Honor,
5 A.
Yes.
5 was to show- I think the jury is entitled to know, she
6 Q.
And it's this thick?
6 bas testified similar to an expert, and all rm doing is
7 A.
I don't know, we have a bunch of them. I don't know
7 trying to draw out bow much training she bas bad on the
that we necessarily have that same one.
MR. MURPHY: Your Honor, could we approach?
8 Internal Revenue Code and bow complex the law is. I think
9 that's fair, because she bas drawn legal conclusions, she
10
THECOURT: Youmay.
10 bas testified like an expert.
ll
(The following proceedings bad at side-bar
11
THE COURT: What about it?
12
MR. MURPHY: Judge, I don't think she is
12 bench.)
MR. MURPHY: Judge, rm going to object to the
13
14 cross. I mean bow thick the book is and all this stuff,
13 drawing a legal conclusion. She said I did this

14 calculation. In fact, I didn't ask her whether Ms. Kuglin
15 be's not asking about the tax calculation.
15 bad the file. All I asked was what was the limit that
16
16 year. I mean I-
MR. BECRAFT: She bas been tendered as an
17 expert.
18
17
THE COURT: She was entered as a special agent
19 with knowledge about bow to calculate taxes.
THE COURT: Well, I mean she bad fairly
18 limited-- you're outside the scope under 611, that's

19 pretty fair.
20
MR. BECRAFT: That's what she did, and I -
20
MR. BECRAFf: Okay.
21
THECOURT: Youmightwanttotumyourmic
21
THE COURT: And I think we probably ought to go
22 off. But she bas not been presented as a legal expert.
22 ahead.
23 basshe?
23
MR. BECRAFT: Tbankyou, YourHonor.
24
THECOURT: Noproblem.
25
(The following proceedings were bad in open
MR. MURPHY: Well, all she is presented for is
24
25 to do tax calculation.
CROSS -DEBORAH WHITE

405
1 court.)
2
CROSS - DEBORAH WHITE

406
charts. When you compute the taxable income, you took all of
MR. BECRAFf: Can we use the charts or do yoo
2 these figures here for '96 through 2001, all of these reported
3 need to see something on the screen and ask you questions
3 figures here, they're based on the evidence that we obtained
4 about it?
4 from FedEx, correct?
THE COURT: You can use the charts. It is
5 A.
Correct.
6 probably not a bad idea to put it on the screen too. The
6 Q.
The 1099s or W-2
7 screen helps us know for sure where you are. It's a
7 A.
W-2s.
Okay. For these years, and these are the figures that
8 little different than the chart The chart lets you see
8 Q.
9 it The screen, you can point out and say this is where I
9 came from there, correct?
l 0 am, and we can't miss it then.
10 A.
Yeah.
ll Q.
Okay. Now, down at bottom after you go through several
ll
MR. BECRAFT: I think I will stroll over here
12 myself. and can I use my copy?
12 calculations, you have this corrected taxable income and you
13
13 have the various figures fer the various years, correct?
14 Q.
THE COURT: Sure, that's fine.

Now, you drafted this document up in order to calculate
14 A
Yes.
15 bow much she owed in the way of taxes, that's the ultimate
15 Q.
And in order to arrive at that figure, you have to use
16 bottom line?
16 the Internal Revenue Code, consult certain sections, is that
I 7 A.
Correct.
17 correct, Section 61, 62, 63?
18 Q.
And to get there, you have got to calculate bow much
18 A.
Yeah. Well, actually. you know, this return is just
19 Ms. Kuglin made, correct?
19 itemized deductions and her exemptions, I mean you can get all
20 A.
Right.
20 that information from the tax booldet that they mail to you.
21 Q.
And - but then in order to arrive at and ereate this
21 Q.
22 chart, you have to have at least some knowledge, a good
You have used your overall broad knowledge of tax laws
22 in order to devise and create this chart, is that true?
23 working knowledge of the tax laws, correct?
23 A.
Yeah.
24 A.
Yeah.
24 Q.
Okay. But in order to make -- come up with corrected
25 Q.
Now, you have a line here, you know, on one of these
25 taxable income, either fi:om a booklet like the 1040 booklet or
CROSS - DEBORAH WlllTE

407
from the tax code iiSelf, there's an interrelationship between
408
A.
That's correct.
2 Section 61, 62, 63 to arrive at something called taxable
2 Q.
3 income, correct?
3 liability that is dealt with in this case, right?
That's an adjustment as to the aggregate ultimate tax
4 A.
Ub-huh.
4 A.
Right.
5 Q.
And you also, to deal with the, you know, moving up the
5 Q.
Somehow, some way, we have got to -- there was the
6 line here to adjusted gross income, in order to calculate
6 $1,300 that was withheld in '98. Okay, can you tell us the
7 corrected taxable income, you take adjusted gross income and
7 section of the Internal Revenue Code that would allow somebody
8 you deal with itemized deductions,
correct0
to have credit for withheld taxes?
9 A.
Correct.
9 A.
10 Q.
And the tax code iiSelf deals with itemized deductions,
10 I don't know the exact code, but I do know this.
11 right?
You know- no, off the top of my head, no, rm sorry,
11 Q.
Okay.
12 A.
Okay.
12 A.
That - she didn't have any wages -- I mean she didn't
13 Q.
And can you tell us off the top of your head - I think
13 have any federal income tax held withheld from her salary, and
14 you have limited it primarily in referenoe to this particular
14 so when we do our calculations if we have-- normally, if-- I
15 case, the itemized deductions primarily to interest payments,
15 guess if people file tax returns and maybe they didn't report
16 correct?
16 all their income, we give them credit for the tax that they
17 A.
Right.
17 did pay. So under normal circumstances, we would give them
18 Q.
Off the top of your head, can you tell us what section
18 credit for any taxes that they would have reported and paid on
19 of the code that would relate to taking that as an itemized
19 their return. In this case, there were no rerums filed, so
20 deduction?
20 there was no tax paid. The only tax that was actually
21 A.
Off the topofmyhead,no, !couldn't.
21 withheld was that $1,300 from Kemper.
22 Q.
Now, rmgoingtoflipovertotheothercharthere,
22 Q.
All righl
23 the one where you calculate the tax due and owing. Lefs take
23 A.
So rm giving her credit for it.
24 a look at the year 1998, you have taxes withheld of$1,300, is
24 Q.
I understand that, but my question was, it should be a
25 that correct?
25 simple matter, can you tell us with which section deals with
CROSS -DEBORAH WlllTE
409
giving a credit for withheld taxes?
2 A.
Off the top of my head, no, I don't know what- I mean
410
Q.
2 A.
Okay.
That says that you must make a return if your gross
3 if I had a question about it, I could look it up, I suppose
3 income exceeds the exemption amount.
4 but, no, I don't have tall of those codes memorized.
4 Q.
5 Q.
5 6001?
How about Section 3 I, does that kind of refresh your
Now, you mentioned 60 I 1, are you familiar with Section
6 recollection., would that -- credit for tax withheld?
6 A.
Yes.
7 A.
rmsony.
7 Q.
Okay. Is it your understanding that at least two laws
8 Q.
Okay. One moment, Your Honor. You have also given
8 that relate to the filing of income tax rerums are Section
9 testimony that - I didn't write them all down, but you -
9 6001 and 601 I of the Internal Revenue Code?
I 0 when Mr. Murphy was asking you questions, he asked you about
10 A.
Yes.
11 what the threshold amount was for each year for filing?
1 I Q.
And did you consult - in your testimony, when you gave
12 A.
Ub-huh.
12 these figures right here, you know, these are the filing
I 3 Q.
I wrote them down-- I didn't write them all down, but
13 requirement. Did you actually look up the law to determine it
14 I think you said 6500 or 6550 for I 996.
14 or did you do something like consult an insbUCtion booklet?
15 A.
6550, right.
15 A.
16 Q.
ln'97,itwas6800,right?
16 booklet, because it's right there, it is available, you can
17 A.
'96 is 6800.
I 7 download them off the internet, and, yes, I looked at the
18 Q.
Let's forget all the other figures, but you rattled
18 instruction booklet, but I have since, you know, looked at the
No, actually, we- I did look a1 the instruction
19 them all, is that correct?
19 code too.
20 A.
Yes.
20 Q.
2 I Q.
Now, is the Iiling requirement, that provision, do you
21 figures that you used, if you make so much money, if you make
22 fmd it in the law?
Okay. Do you know whether or not that -- you know, the
22 6500, if you make 6800 in '97 or if you make 6950 in '98,
23 A.
Do you have to file a return?
23 whether or not in Section 600 I or 6011 of the Internal Revenue
24 Q.
Well, yes.
24 Code that you will find that type of information?
25 A.
I mean I think it's 60 I l.
25 A.
I don't know that it says the exact dollar amount, but
REDIRECT - DEBORAH WHITE

412
411
it does say about the exemption and all.
TIIE COURT: Thank you. We will let you step
MR. BECRAFT: Your Honor, I believe that's all.
TIIE COURT: Redirect.
MR. MURPHY: Your Honor, I don't-- well, since
5 itcameup.
6
7 BY MR. MURPHY:
MR. MURPHY: Judge, there'll be no other
7 witnesses, and at this point the government rests with the
Would you go through wbat the dollar amounts were that
9 required filing of the tax return for each of the six ye:JIS?
10 A.
(Witoess excused.)
THE COURT: Will there be any other witnesses
5 for the United States?

Q.
2 down.
Okay. In 1996, if you were single and under the age of
exception we would ask Your Honor to take judicial notice

9 of the fact that Memphis-Shelby County, Tennessee is
10 within the Western Judicial District of Tennessee.
II 65 and your gross income exceeded $6,550, you were required to
II
12 :flle an income tax return.
12 that. Of course, ladies and gentlemen, we can only take
TIIE COURT: I will take judicial notice of
13 Q.
Okay.
13 judicial notice for something that's so obvious that all
14 A.
In 1997, if you were a single person under the age of
14 of us know, and it is obvious that Memphis and Shelby
15 65 and your gross income exceeded $6,800, you were required to
15 County is within the Western District of Tennessee.
16 ftle a federal income tax return for that year.
16
In 1998, for a single person under the age of65, the
17
All right. We're going to take about a
17 ten-minute break, and rm going to see where we're going
18 amount was increased to $6,950. So if your gross income was
I 8 next, and then we will let you know. So rm going to take
19 in excess of that- equal to or in excess of that, you were
19 a ten-minute break, we're going to stay out here and work,
20 reqlrired to file an income tax return.
20 and we will let you know at the end where we're
1999, that amount was increased to $7,050. 2000, that
21
21 proceeding. See you in ten minutes.
22 amount was increased to $7,200, and in 2001, the amount was
22
(Jwy out at2:47.)
23 $7,450.
23
TIIE COURT: Anything from the defense?
24
MR. BECRAFT: Yes, Your Honor, under Rule 29
24
25 questions.
25 real quick, and then we might require maybe about five
413
414
minutes to move some exhibits around and get them in -2 M,. Kuglin up there on the stand and then have a way of
3 digging out her-TIIECOURT: Sure. Mrs. Saba, lefs move those
things out of the cenler of the well while we're doing
it, Your Honor.

2
TIIE COURT: Mr. Murphy?
MR. MURPHY: Well, Judge, the proof established
4 several things. The proof established that she had
5 taxable income. The proof established that her income was

6 above the levels that reqWred filing. The proof in -
6 that
7
Yes, sir.
MR. BECRAFT: Your Honor, on- on my motion, I
7 and it was one of the exhibits they introduced from

8 Federal Express that, fran.ldy, we didn't have that and
9 just- I will make this real short, sweet and simple.
9 FedEx never gave us, but that- in 1995, she claimed an
10 There are three elements the government has got to prove.
10 exempt status. If you look at the W-4, it- in order to
11 One is willfulness. You know, this has been an extremely
11 be exempt, you have to be entitled to a refund of all your
12 short case. The government has shown, one, that there was
12 prior year tax liability and -- or all your taxes and
13 a '92 return filed, then there are no returns filed for
13 don't incur any tax liability for the future year. That
14 the years in question. There has been some withholding
14 was not a true statement. Based on the evidence the
15 and then there has been no withholding. We have had proof
15 government put forth, that was not a true statement. Now,
16 regarding what the gross amount of wages were, we just
16 at this point she hasn't made that defense, and once she
17 completed the calculation of the tax, but it seems like to
17 gets up there, we have got to come up with some evidence
18 me that the government has got to have at lea.'l a
18 that rebuts it either through cross examination or
19 scintilla of something more to show that she had that evil
19 whatever, but there was also proof she filed in '93.
20 animus, that malignant intent, that bad motive-- I won't
20 There was proof that '92 -- there was proof that notices
21 add any more adjectives, Your Honor, but you know one of
21 have been sent to her, that she had been subject to IRS
22 the things about this case is there is something missing
22 levies. And we would submit, Judge-- granted, it's a
23 reganling intent. And I think that an evasion case has
23 quick case, but the government shouldn't be penalized for
24 got to be stronger than we have seen here. It has been
24 being efficient. And there is also the comment of Mr.
25 all paper, not even a letler from the defendant. That's
25 Scobey that you don't have to comply with the IRS summons.
,(''
416
415
lliE COURT: Well, certainly, the law and all
lliE CLERK: All rise.
2 inferences are taken in favor of the government in the
(Recess taken at 2:52 until3:06 p.m.)
3 context of this motion for this pwpose, and the court
lliE COURT: Bring the jury in.
4 doesn't make any determinations on credibility questions
6 motion is denied.
7 bench.)
THE COURT: Let me see counsel at side bar.
5 or anything like that, and so, therefore, the defense
Is the defendant ready to proceed and do you
8 want a couple of minutes?
lliE COURT: Do you have any objections to
MR. BECRAIT: If we could have seven or eight,
9 the -- to any of the ones submitted by defense, the
10 maybe ten minutes, maybe the afternoon break will be
10 instructions?
II sufficient and then we would have --
ll
THE COURT: Go ahead and tell the jury then,
12
MR. MURPHY: Judge, I have got objections to
12 talking about the Paperwork Reduction Act and all that,
13 Mrs. Saba, we're going to take our afternoon break at this
13 because that has been rejected by all the courts
14 time. We are going to come back and we do anticipate the
14 uniformly. I have an objection to the stuff about the
15 defense -- are you going to put on some proof?
15 Anti-Injunction Act because they can go - they have got
16
MR. BECRAIT: This afternoon, Your Honor.
17
THE COURT: Okay.
17 have got wrilll:n down what is the problem.
18
MR. BECRAIT: I just need to-
18
19
THE COURT: Only for the purpose of advising
19 quotes from Bishop, are there? I take it that is not a
20 the jury.
16 avenues of- Judge, if you want to stay tonight, I mean I
lliE COURT: There's no objection to using
20 problem.
21
MR. BECRAIT: Yeah.
21
22
THE COURT: And we will come back and there
22 said, rm stuck with it, Judge.
MR. MURPHY: If that's what the Supreme Court
23 will be some additional testimony, so we will add ten
23
24 minutes to our break, and this is our afternoon break.
24
MR. BECRAFT: Thanks, Judge.
25 See you in ten minutes.
25
lliE COURT: All right.
418
417
was I swam. It was a culture thing where she didn't want
court.)
MR. BECRAIT: May it please the court, the
2 to swear, so we talked about it, and what she wanted to do
3 defendant calls the defendant., V ernice Kuglin.
3 was affmn.
lliE COURT: Would you mise your right hand,
5 please? Do you swear that the testimony you are about to
5 court.)
THE COURT: Sometimes individuals wants to
6 give in this case will be the truth, the whole truth and
7 nothing but the truth, so help you god?
7 affirm and not swear, and I usually ask them in advance do
lliE WilNESS: To the best of my ability, Your
9 Honor, yes, sir.
10
THE COURT: I have never had somebody say that,
11 so lefs talk with counsel and see if that's okay.

12
13 bench.)
14
MR. BECRAIT: I will simply tell her to say yes
15 or no, Judge.
16
MR. MURPHY: I think she has got to swear or
17 affirm, I don't think-18
THE COURT: I think it's I do or I so swear or
19 I affirm or I do.
20
MR. BECRAIT: I will tell her to affmn. Judge,
21 I think that may be the problem.

22
THE COURT: Well, ru ask her again and we
23 will see what the answer is. I had somebody one time
8 you wish to affirm or do you wish to swear, it doesn't

9 matter.
10
THE WITNESS: I can swear.
II
lliE COURT: Okay. Well, then, raise your hand
12 and rU swear you again so we're all clear. Do you swear

13 that the testimony you are about to give in this case will
14 be the truth, the whole truth and nothing but the truth,
15 so help you God?
16
lliE WITNESS: Yes, I do.
17
lliECOURT: Okay. Thankyou.
18
19
20
21
22
23
24 who - what did that lady say? It wasn't in your case, I
24
25 had a lady who said I swam. She didn't say I swear, it
25
DIRECT - VERNICE KUGLIN

419
VERNICE KUGLIN,
420
Q.
Okay. Let me stop you right there. Who are your
2 parents?
3 Defendant, and having been fust duly sworn. was
3 A.
4 Q.
Were they American citizens?
5 A.
Yes, they were. My father was born and raised in
DIRECT EXAMINATION
My parents were Teckla and Carl Kuglin.
6 BY MR. BECRAFT:
6 Kansas. He was a fust generation American, and my mother was
7 Q.
7 born and raised in Milwaukee, Wisconsin. She was also fust
A.
Will you state your name, please?

Yes, and I will state it correctly. My name is Vemice
8 generation.
9 Braendli Kuglin.
9 Q.
I 0 Q.
10 employed ar the lime you were born?
Okay. rm sure the court reporter would like it
All right. And what was your - how was your father
II spelled.
II A.
12 A.
12 Mission, and after I was born, he registered my birth with the
His spelled V, as in Victor, E-R-N-I-C-E. Middle
He was a missionary. He worked for the Sudan United
13 name is B, as in boy, R-A-E-N-D-L-1. My last name is Kuglin,
13 United Slates Consul in Nigeria.
14 K-U-0-L-I-N.
14 Q.
15 Q.
15 teens, about what you did. where you lived. where you went to
You heard your name pronoiDlCed a multitude of different
16 ways in the courtroom. Your last name is Kuglin, correct?
Bring us quickly, if you can, up until about your mid
16 school.
17 A.
That's correct
17 A.
18 Q.
You're the defendant?
18 When I was born, as I said. we were in Nigeria, I was born in
Well, at the age of six- let me back up a little bit.
19 A.
Yes.
19 a mission hospital, and I grew up out in what we call the
20 Q.
Have been throughout this whole trial?
20 bush. It was - we had a thatch roof house, mud block. no
21 A.
Yes.
21 running water, no electricity, the kitchen was about fifty
22 Q.
Could you tell the jury a little bit about yowself,
22 yards from the house, it had a tin roof, and the outhouse was
23 about where you were born, where you grew up, a little bit
23 about a hundred yards from the house. So I grew up in a
24 about your schooling?
24 pretty primitive environment or conditions, but it was a life
25 A.
25 that I learned to love. At age five, I was given
I was born in Nigeria, West Africa.
DIRECT- VERNICE KUGLIN

421
anti-malarial drug, with Aspirin, I was paralyzed. and my
422
I A.
I had always dreamed of being a flight artendant, and
2 parents brought me home to the slates where I went to Mayo
2 so I went down to Dallas, and I interviewed with Braniff. At
3 Clinic for some treatment. Went back out to Africa, and was
3 that lime, Braniff was in its heyday. They had come out with
4 then- at age six, I went off to boarding school. Now, all
4 the new Braniff strip, and it was, you know, it was the
5 of the missionary children in Nigeria lived in boarding
airlines to fly for. I did not get hired by Braniff, and so I
6 school, and this was 400 miles from where my parents lived.
6 ended up working ar Texas Instruments on the assembly line at
7 and we lived there nine months out of the year. When I came
7 nighttime, and then later I did door-t<>-door encyclopedia
8 back to the states again in my fifth grade, went to school in
8 sales work, a job thall'm glad rm not doing now. Later on
9 Kansas, and then again when I was a freshman in high school.
9 in that year, I decided to go back to Braniff to interview
I 0 Q.
All right. And when was it you entered high school?
I 0 again, and I was hired as a flight attendant, and I stayed
ll A.
I entered high school in 1961, this was in Kansas.
ll with Braniff from 1966 through '69. In March of'67, I
12 Q.
Did you complete high scbool?
12 lr.insferred out to Travis Air Force Base, and I flew the
13 A.
Yes and no. I did three years of high school, and I
l3 mili!aty contract flights flying troops into Vietnam.
14 had all - I had taken all the credits that were available,
14 Q.
15 and so I went on to college out of my junior year of high
15 and get married to them?
16 scbool because college only required - it required fewer
16 A.
Yes, I did.
I 7 credits than it was necessary to graduate. So I went on to
17 Q.
Was that a long marriage?
18 college through -- from my junior year.
About this time fiame, '68, '69, did you meet somebody
18 A.
No, that was a rather short marriage.
19 Q.
Okay. As a result, did you have a son born to you?
20 were in school, '65, '66 through whatever?
20 A.
Yes, I did. My son Christopher was born, and when he
21 A.
21 was two months old, his father and I separated.
19 Q.
Give us an approximate range of the yeaxs in which you
It was about '6 - let's see, '63 through about '66,
22 and in 1966, I dropped out of college.

23
Q.
22 Q.
Okay. And when was that?
Okay. And did you seek employment after !hal?
23 A.
That was in !969.
24 A.
Yes, I did.
24 Q.
All right What employment have you had since you--
25 Q.
What was that?
25 since 1969 and had your son?
424
423
l A.
Oh, Jet's see, I have done many lhings. I have worked
and bring along a certain amount of money that he would
2 for the Welfure department. I've been a waitress. rve been
2 continue my flying lessons. So I left my son with his father
3 a kitchen help. I have been a secretary. I have been a file
3 and went to Dallas. Unfortunately, Alex could not-- did not
4 clerk. I was a book manager for a librnry, and I guess that
4 have time to give me the flying lessons, but I ended up taking
5 covers that range.
5 flight training at Beecham Field there in Fort Worth where I
6 Q.
6 got my commercial, my instrument and my multi-engine rating.
Okay. And how long was that that you were doing those
7 Q.
7 types of jobs?
8 A.
Well, that was until about '78.
9 Q.
And where were you living at that time?
10 A.
I was living in Baleo, California, Fairfield,
MR. MURPHY: Judge, could we approach?

9
TIIE COURT: You may.
to
(fhe following proceedings had at side-bar
it bench.)
l l California.
12 Q.
Did there come a time -
Did you get a job in 1978 that had something to do with
MR. MURPHY: Judge, I know that counsel wants
12
13 aiiplanes?
13 to get as much personal to give the jury some personal
14 A.
14 context, butlhis is just irrelevant.
Actually, what I did, in 1975, Emily Wumer had been
15 hired by Western. She was the first woman to be allowed to
15
16 fly for the commercial carriers, and I was looking for a
16
THE COURT: Okay.
17 career so that I would be able to support my son. put him
17
MR. BECRAFT: Okay.
18 through college and such, and a friend of mine suggested that
18
19 I might take pilot training.
19 court.)
20 Q.
And did you?
21 A.
Yes, I did. So I went down to the local Nappa County
MR. BECRAFT: I'll speed it up. Judge.
Ms. Kuglin, listen to my question, can you tell us
20 Q.
21 about - where are you employed now?
22 Airport, and I started taking my flying lessons. I got my
22 A.
23 private license there, and the same friend had gotten then
23 Federal Express.
24 hired by American Airlines and had moved to Dallas. So he
24 Q.
Okay. And how long have you been working for FedEx?
25 told me that if I would come down to Dallas that he would-
25 A.
I have been working for FedEx since 1985.
DIRECT-VERNICEKUGLIN
rm currently on a personal leave of absence from

425
Q.
All right. Where were you working before that?
2 A.
I was working for Royal Airlines in Shreveport,
426
Q.
And then you moved from, I guess, '80 or '81 to '85,
2 you were flying as a pilot for Royal?
3 Louisiana.
3 A.
Royal, right.
4 Q.
And what were you doing for Royal Airlines?
4 Q.
And lhen FedEx?
5 A.
I was flying their aiiplanes. I was first a co-pilot
5 A.
And !hen FedEx. And my son-- I had mentioned earlier
6 and then a captain on the Beech 99 and then on the Bondarondi
6 that I had left my son with his father, but that was only for
7 (spelled phonetically).
7 a year. So during this time that I was building time, my son
8 Q.
So you moved from Royal to FedEx?
was with me, and we moved around quite a bit.
9 A.
Yes, I did.
9 Q.
to Q.
So when did you start to work for Royal?
10 A.
When was it that you moved to Memphis?

I moved to Memphis in June-- excuse me, June of'85.
It A.
I started to work for Royal, that was after my
it Q.
And you have lived here ever since"
12 employment as a corporate pilot in Lafayette, Louisiana, so
12 A.
Yes, !have.
13 that was in 1980- '80, '81.
13 Q.
And for the last- since 1989, have you lived in a
14 Q.
So you were - before Royal, you were flying also?
14 very specific spot in Memphis?
15 A.
Oh, yes. I flew corporate in Lafayette, Louisiana for
15 A.
Yes.
16 an oil canpany for six months, and prior to that I had been
16 Q.
What's the address?
t 7 instructing for two years. After I received all my ratings, I
17 A.
I have lived at 200 Wagner Place, number 802, Memphis
18 instructed for two years. I flew sky divers on the weekend to
18 Tennessee. It's right on lhe corner of Beale Street and
19 build time, and those were my aviation jobs. Trying to build
19 Wagner place.
20 my time so that I could get hired by FedEx.
20 Q.
Ms. Kuglin. did - have you read the indictment in this
So the late '70s, you were training?
21 case?
22 A.
Yes.
22 A.
23 Q.
Flying sky divers, then you went to work for a company
23 Q.
You heard the -- you understand lhe indictment, right?
24 as a corporate pilot?
24 A.
Yes, I do.
25 A.
25 Q.
It charges you with six counts of tax evasion?
21 Q.
Yes.
Yes, !have.

427
A.
2 Q.
428
all the way up into the '80's.
Yes.
You heard Ms. Osborne come from the service center. and
2 A.
Oh, yes, I did.
3 she gave testimony in this case, and you sat right over there
3 Q.
Okay. Did you file returns in '91,'92?
4 and listened to it, correct?
4 A.
I did.
5 A.
Yes.
5 Q.
Why were you filing those returns during those years
6 Q.
She said you didn't file retwns from -
6 that I have just named off?
MR. MURPHY: Judge, I don't believe commenting

on other witness' testimony is proper, and I'm going to
9 object.
I0
TIIE COURT: Objection sustlined.
7 A.
Because I thought that I was required to.
8 Q.
And was that based on any study of the law?
9 A.
Oh, no, not at all.
10 Q.
Did you ever prepare for these years, '65 through about
II Q.
Ms. Kuglin?
II '91, '92, did you prepare your own retwns?
12 A.
Yes.
12 A.
Some of them, I did.
13 Q.
Let me back up, and I'll ask you this: When was it
13 Q.
All right. Did there come a time in which you had
14 that you started filing returns?

15 A.
14 others prepare your returns?
Fiistjob I had ever had wasA&WRootBeerinHolton,
16 Kansas, and that would have been 1960, '61 when we fll'St came
15 A.
Yes, H & R Block did some of my returns. I had an
16 accountant here in Memphis do some of my returns.
17 back from Africa.
17 Q.
18 Q.
18 have looked at the '92 return that the government has offered
Do you have a recollection as to when it was you filed
If we had-- I don't know the exhibit number, but you
19 your fiJ'Sttax return?
19 into evidence, correct?
20 A.
20 A.
That's correct.
21 Q.
There's an accountant listed on there as a return
I would presume that it was probably - although that
21 may have been with -- on my parents, so I
don~
know exactly
22 when the fll'St return was filed.
22 preparer, right?
23 Q.
If somebody said '65, would you disagree with them?
23 A.
Yes.
24 A.
Oh, no, not at all.
24 Q.
And that's Mr. Knapp?
25 Q.
And did you file returns in the late '60s, early 70's
25 A.
That's correct.

429
Q.
He prepared your '92 retwn?
430
Q.
What happened then?
2 A.
Yes.
2 A.
3 Q.
Did he prepare some of your returns before that time?
3 airlines or sales people, people who are gone, that when you
I believe he did, yes.
4 get home, there's a lot of mail, a lot of housework, a lot of
4 A.
Q.
6
For a number of years, whatever amount. Okay.

Have you ever attended any cour.;cs on tax all the way
I was between flights, and as anybody who wod<.< for the
5 everything to do, and so I was cleaning house and turned on

6 C-Span, as you heard Mr. Becraft say earlier.
7 up through about '91 or '92?
7 Q.
Can I slop you right there?
8 A.
Notatall.
8 A.
Yes.
9 Q.
Had you ever looked at the Internal Revenue Code?
9 Q.
You said-- I brought up something with the jury, can
I 0 A.
I didn't even know what it looked like.
10 you kind of describe what you do, your daily routine when
II Q.
Okay. Let me go straight lo the matter, for the years,
II you're flying for FedEx?
12 '93, '94, '95, '96 through 2001, Ms. Kuglin, did you or did
12 A.
Oh, yes, I can.
13 you not file federal income tax returns?
13 Q.
All right
The routine is different. We as pilots bid every month
14 A.
No, I did not.
14 A.
15 Q.
Why?
15 for the routings that we wam lo fly, and based on seniority
16 A.
For the last ten years, I have been asking the IRS
I 7 either through my own letters, through visit< to the IRS and
16 and what we can hold in the seniority level, then we have a

17 different schedule every month. Some of the schedules entail
18 fmally through an attorney what section of the Internal
18 getting up in the middle of the night. flying 1o the
19 Revenue Code makes me liable for the individual income tax and
19 destination, sleeping in the hotels all day, coming back inlo
20 what law requires me to file the Form 1040. And to this day,
20 Memphis at midnight that night and going back out again.
21 I have not had my questiOIIS aoswered, and so I decided then.
21 Thafs what we call the infamous hub terms. Those are the
22 Q.
When was it that you started changing your beliefs
22 flights going in and out every night. Other flights leave
23 regarding the filing of income tax returns?
23 Memphis around 2:30 in the morning, go to a destination, sit
24 A.
24 for a few hours and then back into Memphis. Other flights are
Well, the journey that got me to this point to where we
25 are today actual! y started in 1992.
25 international flights which are 15-<lay flights where we're

431
432
gone a long period oftime, and I did those flights when I was
discussing also taxes. And I found it so interesting and so
2 a co-pilot and flight engineer predominantly. So every month,
2 novel that I had never heard any of this stuff before that 1
3 the schedule is different, but we're away from home ptobably
3 called the 800 number and asked them to send me some
4 anywhere from 200 to 400 hours a month.
4 information and anybody who might -- I might contact in the
5 Q.
And basically while we're sleeping, you're working?
5 local area So I got the information. ExctL<e me. And they
6 A.
Basically.
6 referred me, excuse me, to a gentleman by the name of Don
7 Q.
Now, sometime in 1992, I interrupted you a minute ago,
7 Wmfield. Don Wmfield at that time was the chairman of the
you were saying something about you were doing something at

9 home when something came to your attention about something,
8 Tennessee State Libertarian party, and he was conducting

9 meetings here in Memplris. So I went to the meeting. It was a
10 taxes?
10 small group, and I asked them basically what a Libertarian was
1 I A.
II or what the word meant, what the philosophy was, and I learned
Yes, I was cleaning house, and I listen to the TV so I
12 can get things done, and I would on C-Span, and on C-Span that
12 at that time that there were really two words, there were the
13 day, they were covering the Liberwian National Convention,
13 big L --there was the big L for Libertarian, which was the
14 it was in July of'92. And I had never heard of the word
14 political move, and then there was the little I Libertarian,
15 Libertarian before. I had no idea what it meant. I had no
15 which was the philosophy of the Liberwian movement. and I
16 idea there was a political party called the Libertarian Party.
16 found out from that that the Liberwian philosophy wa<
17 So it caught my interest, and there two gentlemen, Andre Maru
17 basically the same philosophy of the founding fathers, the
18 (spelled phonetically) Dick Body (spelled phonetically) who
18 philosophy that generated the Bill of Rights, the Constitution
19 were vying foc the nomination for the ptesidential candidate,
19 and the Deelaration of Independence, and this philosophy was
20 and as I listened to the debates between these two gentlemen,
20 that in a civil society the initiation of force and the
21 I started hearing things that I had never heard the other two
21 initiation of fraud are not acceptlhle activities, that we as
22 parties talk aboul I had been member of both the Republican
22 citizens are absolutely responsible for our actions and we are
23 and the Democrat parties at different times, but these
23 required to also hold those in power responsible for their
24 gentlemen were discussing the Constitution, they were
24 actions. I also learned that the role of government in a
25 discussing the role of government in society and they were
25 society is to protect the rights of life,Jiberty and the
433
434
pursuit of happiness for people.

2 Q.
Now, this-- so you became interested in the
MR. BECRAFf: rm listening to this TV back

2 here, I was wondering if the court could inquire as to
3 Libertarian party as a result of hearing this on the TV and
3 whether the jury can hear Ms. Kuglin?
4 meeting Mr. Winfield?
TilE WITNESS: Can you hear me all right?
TilE COURT: They can hear fine. She is
A.
6 Q.
Yes.
Can you just briefly tell the jury what was your
7 association with the Libertarian party from that poinl until
6 speaking into her mic, I think everybody can hear well.

7 You can tum off the screen, if you want to.
8 about '95 or '96, just what you did?
9 A.
9 Judge.
Okay. Let's see. I was elected chairman. The stlte
MR. BECRAFf: I may not know how to do it,
I 0 Libertarian party, the firSt meeting that I went to, they were
10
II looking for somebody and I was interested and I thought it
II think the juror can handle thal Thank you.
12 would be good learning the information about the Libertarian
12 Q.
13 party. I was also directed to an organization called the
13 various meetings where you went --
14 advocates for self-government, and the advocates are located
14 A.
Well, initially --
15 in Atlanta. They are really the educational arm of the
15 Q.
-regarding the Liberwian party.
16 Libertarian party, and from them I ordered a Jot of
16 A
rmsorry.
I 7 information, lots and Jots of books. I have a room in my
17 Q.
You told us you went to a lot of Libertarian meetings,
TilE COURT: It has got an on/off button.
Did you learn anything about taxes by attending these
18 house that the entire wall is a book shelf of videos, books,
18 did you Jearn or begin to Jearn anything about federal income
I 9 tapes, flyers and such that I ordered from the advocates and
19 taxes while you were going to these various meetings?
20 from other places. Don and I went to conventions. Don had
20 A.
21 seminars. I organized a group in Memphis called the Advocates
21 made me take notice was that I kept hearing the fuct that the
22 for Self-Government supper club and once a month, people who
22 income tax was a voluntary tax. Now, I had been paying my
23 were inlerested would get together and we would discuss the
23 taxes, I had been filling out my I 040 forms, and Mr. Becraft
I think the first thing that I heard which struck me or
24 social political ideas of the Libertarian party and of the
24 asked me earlier why I had been doing it at that time, and I
25 United States.
25 said because I thought I had to. Another fuctor was that I

436
435
was afraid if l didn~ that something bad would happen to me.
code. for IDlderstanding what it says. for determining whether
2 So when l started hearing that it was a voluntary system. it
2 or not there's a tax that applies 1o us. !fit is, if we
3 just took me surprise. l couldn't IDlderstand how it could be
3 determine that we are liable for one of the taxes in that
4 a voiiDltary system. And they said it was a voluntary
4 code, then it is our civic duty to fill out the documenls
5 which relate to that tax.
compliance.
Now. the words voluntary and compliance to me don't
Now, once we filled outthe documents and
7 match very well. Voluntary. !looked up in the dictionary.
7 self-assessed. it's now our responsibility to comply with our
and it - basica.Jiy. it was something that wasn't mandatory.
8 assessment. And !learned that as American citizens. we are
9 it was something that you chose to do, that you -- compliance
9 responsible for self-assessing. And once we self-assess. then
I 0 was completely different It was something that you had to
10 we miL<! comply. But firSt of all. we have to determine
II do. So l was confused by this term. and l - somebody at one
II whether or not we're liable for one of the taxes. So that
12 of the seminars suggested that l call the IRS and ask them if
12 straightened out the different-- the conflict in those words
13 the income tax was a voiiDltary tax. So l did l ca.lled up
13 forme.
14 the IRS. and l said, you know. I would like lo know if the
14 Q.
15 income tax is voluntaiy because if it is, l want to
15 into when you got involved in this -- on your personal
Okay. But-- one of the firSt things you kind of ran
16 IDIVOIIDlteer right now. And they said. no, its voluntary
16 endeavor to learn something about the tax laws, you heard
I 7 compliance. and l said what does voluntary compliance mean.
17 these statemenls about voliDlta.ry?
18 and they said you have to do it And l said that doesn't
18 A.
19 SOIDld very voluntary to me. Well, the conversation didn't get
19 Q.
Now, down to your left--
20 very fur. So l decided l needed to look somewhere else, and I
20 A.
Yes.
21 kept asking around, reading, trying to fmd some understanding
21 Q.
- on the floor. there is that blue box. can l request
Yes,! did.
22 of this conflict of terms. And I fmally met a gentleman, l
22 that you pull out the files that bear the numbers 5 through 15
23 don't remember his name anymore, heard him at a seminar that l
23 and then also 22? Do you have them?
24 heard him speak at, and he said his understanding was that as
24 A.
Yes.
25 American citi:rens, we arc responsible for reading the tax
25 Q.
Okay. Now, can l direct your attention to the one that

437
is - has the number on it of five?
438
Division of the IRS. And as the committee was asking some
2 A.
Yes.
2 questions, they rnised a question in reference to where there
3 Q.
Okay. Can you identify that forme, please?
3 would be some offices or counsel that would be -- that they
4 A.
Yes. This is entitled Internal Revenue investigation.
4 would contact. and Mr. Curtis who was one of the Congressmen
5 It's dated Thursday. February the 3rd, I 953. House of
5 asked the question -- made the comment an alcohol tax matter
6 Representatives Subcommillee on Administration of the Internal
6 that would go to the appeals sectioo, and he was interrupted
7 Revenue laws of the Committee on Ways and Means, Washington.
7 by Mr. Avis. and Mr. Avis said there is no such thing, that is
D.C.
9 Q.
8 where the slructure differs. and he went on to say. let me

Is that something that you read and relied upon that
I 0 related to your IDlderstanding of tax laws?
9 point this out now, your income tax is one hiDldred percent
10 voiiDltary tax. Your liquor tax is a one hundred percent
II A.
Oh. yes, it is.
II enforced tax. Now, the situation is as different as night and
12 Q.
Do you have a judgment or recollection as to when it
12 day. Consequently. your same rules just will not apply.
13 was that you might have seen or read this document?

14 A.
This would have been early on prior to the time that!
13 Q.
Now, what's your understanding that that passage that
14 you just read us from. what does it come from?
15 slopped filing. somewhere between '92 and '95.
15 A.
16 Q.
Okay. ButnolaterthanAprilthe 15thofl996?
16 a congressional hearing, that comes from a man who is at the
17 A.
Oh, no, not at all.
17 head of an agency. and he's telling me here that the income
18 Q.
And what was it in this particular document that was
l 9 important for you?

20 A.
Well, the- l can probably quote it better than I can
Well, this comes from the government. This comes from
18 tax is one hiDldred percent voluntary tax.

19 Q.
Okay. And it wa< your understanding that you were
20 reading from a government document?
21 fmd it. What was happening at this time is there was an
21 A.
Yes. sir.
22 investigation of the lntemai Revenue Service for corruption
22 Q.
Okay. Let's kind of flip that over and set it aside
23 within the service, and at this investigation was Mr. A vis who
23 for right now.
24 at that time wa< the -lets see, Mr. Avis, he, l believe,
24 A.
Okay.
25 wa< the head of the- of the Alcohol. Tobacco and Firearms
25 Q.
And let me direct your attention to the one - the

439
440
see. The great abuse we're finding in this area, if allowed
document thai has a number six on it.

2 A.
All right. I have it.
2 to continue unchecked, could result in serious decline in
3 Q.
And can you identifY that for us, please?
3 taxpayers' perception of the fairness and evenhandedness of
4 A.
Yes, this is - it says '79 annual report from the
4 our administration of the tax system and consequently in their
Commissioner of the Internal Revenue.

6 Q.
And what was important about that particular document
voluntuy compliance. So here we have six places where the

6 Commissioner of the Internal Revenue Service talked about the
7 in reference to your beliefs?
7 income tax or the tax system being a voluntuy system
8 A.
8 Q.
Well, I find that throughout this document, there was
Take a look at the file that has the number on it
9 some six times where the word voluntary was mentioned, and it
9 seven -- seven and eight
I 0 says- let me read the several places. Let's see, the whole
10 A.
I I sentence, there is no doubt that better taxpayer assistance,
II Q.
Yes.
12 more sensitive responsiveness to taxpayer compliance,
12 A.
Put it back in the file. Which number was that?
13 complamts and problems and simpler tax forms and instructions
13 Q.
Seven.
14 are of great importance in achieving a high level ofvoluntuy
14 A.
Seven.
15 compliance with our tax laws. Later on, it says, to put these
15 Q.
And can you identifY the document for us, please?
16 figures in context in the same tax years individuals
16 A.
Yes, this is a 1992 1040 form
I 7 voluntarily reported nearly 1.1 trillion in income and paid a
17 Q.
Copies of parts of the '92 instruction booklet?
18 total of 142 billion dollars in taxes.
18 A.
Yes, it is.
You want me to set this aside?
The next paragraph, the report lends considernble
19 Q.
Is that something you read and relied upon?
20 weight to the conclusions drawn from past studies that
20 A.
Yes, it is.
21 voluntary reporting is highest when incomes are subject to tax
21 Q.
Direct our attention to that particular document, the
22 withholding. And the next paragraph. in fairness to the
22 '92 instruction booklet bearing the number seven on it, what
23 millions of taxpayers who voluntarily file, report their
23 was it?
I9
24 income and pay the tax, we must strengthen current compliance
24 A.
What was the docwnent?
25 efforts. And I believe there's one more, it says the - let's
25 Q.
What was on thai docwnent that you found?
442
441
I A.
boyfriend looking for ever since. We walked down to
It says right here - excuse me, I'm sorry, it says a
2 note from the commissioner. Dear Taxpayer. Thank you for
2 Gordon Biersch's last night My suspicions is it got left
3 making this nation's tax system the most effective system of
3 down there, but it was all her notes in it, but we have--
4 voluntary compliance in the world.
4 for our exhibits, we have got so much redundancy built
5 Q.
Let me direct your attention to another one, the next
6 one, number eight. Is thai something similar except for '93?

7 A.
Let me get this here. I did have a binder with all of
5 into it that she has misplaced her notebook, but, you

6 know - so we're just going through the ones that she has
7 got
8 these, and somehow it disappeared last night when I left it
9 here at the court, so I'm not sure where it is. '93, yes.
9 thai somehow she left it here, and Mr. Murphy is here and
THE COURT: The problem with the inference is
10
TilE COURT: Let me talk to people at side.
10 it disappeared, thai's the problem with the inference is
II
II thai she's blaming it on the government. Frankly, I'm not
12 bench.)
13
TilE COURT: Okay. That was a very
12 the government, I'm the judiciary. I know we didn't do

13 anything with it
14 inappropriate aside. What is she talking about? You
14
MR. BECRAFT: I will ask a question about it.
15 didn't come to me this morning and say something is
15
THE COURT: Mr. Murphy, we don't have to say
16 missing. What is missing?

17
MR. BECRAFT: No, Your Honor. I left all of
18 our books up here last night
16 anything about it. but I want to make sure that there is a

17 not a problem. If she thinks she is missing something, we
18 need to look for it.
MR. BECRAFT: We have, Your Honor. We haven't
19
TilE COURT: Where did you leave them?
19
20
MR. BECRAFT: Just right there.
20 located it, but we have got so much spare copies that
21
TilE COURT: Is something missing?
21 we're proceeding with the box that we have got. It
22
MR. BECRAFT: Well, no, no-- we don't know
22 poses-
23 where it went. After we left court. I left all these
23
THE COURT: That's no problem. That's fine.
24 exhibits up here so I wouldn't have to bring them back and
24
25 forth. She has a white notebook thai sbe has had her
25 court.)
443
444
Q.
THE COURT: That's the first I had heard about
You had the same exhibits organized for yourself in
2 anybody leaving something in court and it not being here
2 your own little folder?
3 the next morning. I wish they had told me Ibis morning.
3 A.
Yes, I did.
4 We try to lock things up every night, and, frankly, we do.
4 Q.
Which right now cannot be located?
5 We lock: up the courtroom. In fact, we even lock: up the
5 A.
That's correct.
6 jury room. have to unlock it in the morning, but I wanted
7 to make sure there wasn't something that we had
7 you.
THE COURT: If we find it, we will give it to
THE WITNESS: If you don't mind me fumbling
8 inadvertently moved around, and we will look for it,
9 although I don't think-
9 around, I won't need it.
10
THE WITNESS: May I address the court?
10
THE COURT: That's no problem at all.
II
THE COURT: That's okay, I just wanted to make
II
MR. BECRAFT: My personal conclusion is it's
12 sure we didn't lose something.
12 somewhere on Main Street.
THE WITNESS: No, I just meant it was just I
13
14 had them all in file, and so I was just fumbling arouud a
THE WITNESS: Yes.
13
14 Q.
We have been distracted, let's go back to that exhibit
15 little bit. I didn't mean to imply that there was
15 number, what is labeled number 8?
16 anything that - you know, it's possible that I bad taken
16 A.
It's number 8.
17 it with me and left it somewhere.
17 Q.
Kind of hit it fast. Is that another statement lilce
THE COURT: Sure, that's okay. Ijustwanted
18
19 to make sure that we didn't lose anybody, okay.
18 the one you just read?

19 A.
Right, it is 1993, 1040,itsaysyouareamonglbe
20
THE WITNESS: No, no.
20 millions of Americans who comply with the tax law volunwily.
21
THE COURT: It is possible for the federal
21 Q.
22 government to lose something, I agree with you on that
THE WITNESS: I have everything here, it's just
23
24 not as easy for me to get to as my own copy.
THE COURT: No problem.
25
Q.
445
Was that something you read and relied upon?
Okay. Let me direct your attention to the one that has
22 the number nine on it.

23 A.
All right
24 Q.
Or skip that one and go to number ten.
25 A.
All right I have number ten.

446
14 and 15, can you pull those out for us, please?
2 A.
Yes, it is.
2 A.
3 Q.
What was important about it?
3 take me a little while to find.
4 A.
Well, the title is Withholding Is N ol Required.
4 Q.
I also had my documents highlighted, so it is going to
Now, you just got through talking about Exhibit Number
5 Employers and employees are volunteers in a tax scheme. It
5 10, the mission statement of the IRS, right?
6 says employers are not required to have money withheld from
6 A.
Yes.
7 their earnings.
7 Q.
All right. Do 13, 14 and 15, those documents bearing
8 Q.
Okay.
8 those numbers, do they kind of relate to this general topic of
9 A.
Employees, rm sorry.
9 the mission of the IRS?
10 Q.
Okay. Now, listen to my number, I directed your
10 A.
Yes, they do.
11 Q.
Okay. And is it similar to - is that mission of the
II attention to number ten.

12 A.
I'm sorry, you are absolutely correct, I pulled out the
13 wrong one. Number ten.

14 Q.
What is your understanding of what that document is?
15 A.
This document is -- at the lop, it has the Internal
12 IRS in those documents similar to the one in number 10?

13 A.
Let me find this here right here. Yes, it is. The tax
14 system is based on voluntary compliance and taxpayers complete

15 and return the forms with payment of any tax owed.
16 Revenue Service logo, and then it says mission. The purpose
16 Q.
Is there something on that-- is that number 13?
I 7 of the IRS is to collect the proper amounl of tax revenues at
17 A.
This is number 13.
18 the least cost to the public and in a manner that wanants the
18 Q.
Is there something at the top of the page that would
19 highest degree of public confidence. In our integrity,
19 indicate a date?
20 efficiency and fairness, to achieve that purpose, we will
20 A.
Yes, it says 4-1 of '97.
21 encourage and achieve the highest possible degree of voluntary
21 Q.
All right. And is it fair to say that the next two
22 compliance in accordance with tax laws and regulations. We
22 exhibits are basically the same type of document, but for
23 will advise the public of their rights and responsibilities.
23 later years?
24 Q.
Now, let me direct your attention to -- there's a
25 series of similar documents that are labeled or numbered 13,
24 A.
Yes, they are, and they are for4-l-98. Documents come
. 25 out of26 Code of Federal Regulations, Chapter 1. And the
448
447
I
third one is for April I st of '99.

2 Q.
Okay. Of course, these are later in time, but sometime
1960.
2 Q.
Okay. I have to ask you some questions that relate to
3 shortly after these documents would have been published and
3 a promise that I made to the court. Ms. Kuglin, is it your
4 before April 15 of. say, 2000 or 200 I, had you read those
4 understanding that during your testimony of this case that

what you're going to be telling the jury is your beliefS about
documents?
6 A.
Yes, I bad.
6 the law, correct?
7 Q.
Did you rely upon them?
7 A.
That's correct.
Yes. I did.
8 Q.
All right. So if we kind of get rolling along here and
For the belief that there's statements from the
9 you say the law, the law, the law, are you telling us your
8 A.
9 Q.
10 government about voluntary compliance?
10 belief about the law?
II A.
Absolutely.
11 A.
Yes, it is my belief. Just my belief of the law.
12 Q.
Now, these documents right here, 13, 14 and 15, what is
12 Q.
And you understand that later on, the court is going to
13 your understanding as to their real nature, what are those
13 be telling the jury what the law is?
14 documents?
14 A.
That's correct.
15 A.
15 Q.
So you're not attempting to tell the jury what the law
These are 60 I, 602 is tax form and instructions, it's
16 is?
16 about completing the forms.

17 Q.
All right. Is that regulations?
17 A.
No,rmnot.
18 A.
Yes, it is.
18 Q.
Having said about, let's roll back to that document
19 Q.
Let me direct your attention to - can you pull out 22?
19 number 22, did you say it is called the Flora Supreme Court
20 Can you identify the exhibit number or the document that is
20 case?
21 labeled 22 for us, please?
21 A.
Yes.
22 A.
22 Q.
Okay. Did you read that at some time when you first
Yes, the document that is labeled 22 is a - it's from
23 the Supreme Court reporter. It's a case entitled Walter Flora
23 started studying the tax laws?
24 versus the United States of America, and it's dated March-
24 A.
Yes, I did.
25 well, re-argued November 12th, 1959, decided March the 21st of
25 Q.
Okay. Direct your attention to - what was it that was
449
important in that particular case that you noted?

2 A.
This is on this document, it was at page six of 47, and

450
il And what the speakers always tell you to do is not to
2 rely on what they have said, but to go and research the
3 there's a statement which the court returned in their
3 documents, go to the library, find the documents, substantiate
4 decision. It says our system of taxation is based upon
4 what they have basically said, and that's why I got the
5 voluntary assessment and payment, not upon distraint.
5 documents and what I started doing.

Now, you said you got a lot of your tax information at
6 Q.
What did that mean to you?
6 Q.
7 A.
That basically substantiated the things that I had read
7 Libertarian party meetings?
8 before about voluntary-- that the tax system was voluntary,

9 that, as I stated before, we as citizens are to understand the
A.
9 Q.
Yes, and conventions and other places.

Was the Libertarian party, the speakers there, were
I 0 tax code, as best we can, assess ourselves, and then
I 0 they people that - were the only speakers ones that were
II voluntarily comply with the rules and regulations if it
11 speaking about taxes?
12 applies to us.
12 A.
13 Q.
13 seminars that were being held. Don Winfield put on seminars
So would you have read this case and relied upon it at
Ob, no, no, there were other - I went to other
14 some time before, oh, 1996 or 1997?
14 and he bad speakers come. I go to a convention every August
15 A.
Oh, yes.
15 called the ARIS Convention in Aspen and sometimes the speakers
16 Q.
Would it have been before that lime?
16 there are discussing the tax issues.
17 A.
Yeah. Oh, yes.
17 Q.
18 Q.
Give us your best judgment or recollection as to when
18 than taxes?
But are they talking about something beyond or other
Oh - they do, yes, they talk about the -- let me see
19 you were going to these meetings, when was it that you started
19 A.
20 hearing this stuff about voluntary?
20 how to put it.
21 A.
22
It was at the meetings, I first srarted bearing it, and
a. I said before, I started to dig into it and accumulate
21 Q.
Do they have speakers about politics?
22 A.
Yes.
23 documents. At these conventions and meetings that you go to,
23 Q.
Economics?
24 there is a lot of people who bring copies, forms and things
24 A.
They talk about politics, economics, the role of
25 like that which, you know, talk about the different aspects of
25 government in society, how we can improve our society, what

451
452
the founding fathers intended for our society, how the tax
to be very informative and very credible.
2 system was developed and just a wide range of subjects.
2 Q.
3 Q.
3 about the United States Constitution, correct?
Well, so by- between '92 and '93 and all the way up
Now, you listened to these tapes and learned something
4 through '94, were you digging into this topic of how do the
4 A.
Yes. I did.
5 federal income tax laws operate?
5 Q.
Did you read any terms or engage in any sllldy that
6 A.
Absolutely. I had- when 1- some of the material!
7 had gotten from the Advocales for Self-Govemmen~ several of

the books, and I believe that they were in regard to the
6 related to the constitutional provisions that relate to

7 taxation'
8 A.
Yes, I did.
9 Constitution. I got a series of cassette tapes on the
9 Q.
Okay. Explain to us what it was that you were reading.

Okay. I ordered a tax code-- I'm sorry, I didn't mean
I 0 Constitution. I was very interested in fmding out how the
10 A.
I I founding fathers looked at the tax issues and how they
II tax code, I looked over here. It's bigger than this. I
12 determined what type of tax system would-- was going to be in
12 ordered a copy of the Constillltion, and I was really surprised
13 the counlly.
13 when I got it, because the Declaration of independence, the
14 Q.
14 Bill ofRights and the Constitution are in a book about this
Let me stop you right there.
15 A.
Sure.
15 small, and !thought, boy,! have never seen this, you know,
16 Q.
Just for-- you mentioned tapes and I have shown this
16 why did I not get this book in school. And I started reading
17 before, what do I have in my hand?

18 A.
You have a series of cassette lapes done by Knowledge
17 it, and I ordered the set of tapes so that it would help me

18 undersland this, because I had read several places in the
19 Products. They're outside of Nashville, Tennessee or, rm
19 Constitution that related to taxes --
20 sorry, Chattanooga.
20 Q.
Can I stop you right there?
21 Q.
And narrated byWalterCronkyte?
21 A.
Yes.
22 A.
Yes. They have different series, one is on economics,
22 Q.
So you had the tape series, the Constitution itself.
23 one is on religions of the world. different wars of the world,
23 Were there any other documents, that in order to understand
24 just- there's different series of those tapes, and they're
24 the constillltional aspects of federal taxation, any other
25 narrated by different very prominent people. And I find them
25 types of things that you read?

453
I A.
2 there were court cases that I started reading.

Q.
Okay. What were- what were the names of those court
4 cases to your underslanding?
5 A.
Now, listen to my question. Just give the names of the
questions.
9 A.
to get out from under the long arm of the British government,
2 and after the revolution, there was the Articles of
3 Confederation were compiled, and the Articles of Confederation
4 are similar to the Constillltion, much looser than the
The fm;t case was the - that I was directed to, and
6 you'll have to undersland that I took 7 Q.
454
Yes, I did. After I had read the information they had.
The first case was the Pollock case. The second case
Constitution. And the Articles of Confederation, one of the

6 things it did not allow for was fer the national government to
7 be able to levy taxes, and part of this was because the
8 citizens of each of the states, the slates had the power to
9 tax within their own borders and they were, very, very
l 0 was the Brushaber case. The third case was Flint versus Stone
10 hesilant to allow a central government to have the power of
II Tracy. The fourth case was Redfield versus Fisher. Fifth
11 competing with them in the taxation arena. So the Articles of
12 case was Sims versus Ahrens, and the final case in regard to
12 Confederation did not allow for that.
13 this was Jack Cole versus McFarland.

14 Q.
Okay. So in these materials that you have listed off
13
However, situations arose where there was some national
14 emergencies that really needed the federal government to
15 for us, the Constitution itself, the audio tape series, those
15 intervene, and at this time, the national government, as it
16 cases, do they relate in some way to your underslanding about
16 was called then, had very, very limited powers to protect from
l 7 at least the constitutional nalllre of federal income taxes?
17 the enemy without. to adjudicate disagreements, force and
18 A.
Yes, they did.
18 fraud within the society, but without the ability to Jay
19 Q.
Give us -- tell us what you learned by listening to the
19 taxes, they could not really fight a war. and so the - there
20 audio tapes, reading the cases, looking at the Constitution,
20 was a convention convened in Philadelphia in order to revise
21 reading anything else that you did.
21 the Articles of Confederation to allow the national government
22 A.
22 to be able to require the states to pay a portion of the
Well, I found out that the founding fathers were very,
23 very interested in the tax issue. The revolution had
23 monies necessary for a war or something like that. What ended
24 basically - the straw that broke the camel's back was a three
24 up out of that was the Constitution. They actually wrote an
25 cent tax on tea, and the whole revolution basically was llying
25 entirely new document. In those cassette tapes, there's some
456
455
TI!E COURT: Is that okay?
very, very interesting information on the debates that went on

2 about the tax issue. This was -- this was something very,
TI!E WITNESS: That would be fme. Thank you.
3 very serious for the founding futhers, and how they would
TI!E COURT: We're going to take a short break,
4 decide who got taxed, who got to do the taxing and such like
4 and that way I can get something taken care of in the back
5 that. I found out that generally the slrong arm of taxation
5 that I need to actually sign, and I will be right back.
6 for -- in the past, kings, governments and such like that had
6 Five minutes. That will also give you a short break.
7 been customs taxes, indirect taxes, and that -- excuse me, I
7 We're going to stay really much past 5:00. We're going to

8 go right to 5:00, and we're going to stop at 5:00. We're
need to take a drink.

9 Q.
You want me to rephrase?
9 going to come back at 9:00 tomorrow, just like we did
10 A.
Yes.
10 today. 8:30, come back at 9:00 tomorrow, so that will be
11 Q.
Okay. What was it that you learned by studying these
11 our schedule. See you in five minutes.
12 documents? You were telling us about your studies of the
12
(Recess taken at 4:10 until4: 15 p.m)
13 Constitution, relationship to federal taxation, what was it
13
TI!E COURT: You all set?
14 that you learned by engaging this study that had an effect
14
TI!E WITNESS: Yes, thank you.
15 upon your beliefs?
15
TI!E COURT: Sure. rm sorry we- I tried to
16 A.
Right. I found out in studying this that there were
17 two types of-- basically two types of taxes which were
16 check on having-- see if the cleaning folks could have

17 possibly gotten that book. I would have had them check
18 created under the Constitution. There were the direct taxes
18 earlier this morning --
19 and indirect taxes. Now, Article I, Section 8 of the
19
20 Constitution says basically that Congress shall have the power
20 it this way. You know, it will just be a little bit more
21 to -- excuse me, let me get it out. rm a little nervous
21 effort on my part, but that's fine.
THE COURT: Actually, I need to take about a
23 Biersch's, that's my bet, Judge.

24
24 five-minute break.
THE WITNESS: That would be great.
25
MR. BECRAFT: I bet we left it at Gordon
22
22 here.
23
TI!E WITNESS: That's all right. We can handle
TI!E COURT: I wish-- we might make an efftrt
25 to try to take care of everybody.
458
457
MR. BECRAFT: Judge, it's really no problem,

2 because she has made so many copies of the exhibits that
are three places that has a reference to taxes. Article 1,

2 Section 8 of the Constitution states that the Congress shall
have the power to lay and collect taxes, excised, imposed and
3 we have redundancy built in.

TIIE COURT: I think I have done what I should
4 duties, to provide for the common defense and for the general
do. I will check on everything I can and I will continue
welfare. But all duties imposed and excises must be uniform
6 to do that.
6 throughout the United States. In other words, if you have a
TIIE WITNESS: Don't be worried about it because
8 we will be fme. Thank you.

9
TI!E COURT: Well, Mrs. Parker, I'm going to let
10 you actually - we'll be quire and let you go get the
ga~
tax in Vermont of 50 cents, you have to have a gas tax in
8 California of 50 cents. They have to be uniform throughout

9 the country. That Article 1, Section nine of the Constitution
10 addres<;es a different type of tax. It says no capitation or a
11 direct tax shall be laid unless in proportion to the census
11 jury.
12
(Jury in at4:17 p.m)
12 and the enumeration herein before ordered to be taken.
13
THE COURT: Anyway, we're ready to proceed.
13
14 Thank you.
15
16 Q.
MR BECRAFT: May it please the court.

Ms. Kuglin, I have an idea as to where we were before
Now, in Article 1, section 8, they were discussing what
14 is known as indirect taxes. Indirect taxes are those, excised

15 imposed taxes which can be passed on to somebody else. In
16 other words, if you are a business person and you have a
17 the break. You were telling us -- I had posed some question
17 certain business expense or you have a federal -- a tax that
18 about from all this material that you read and studied, you
18 you have to pay, you can pass that on to somebody else.
19 know, you had reached a certain belief about the taxes powers
19 Direct taxes were taxes that couldn't be passed on, they were
20 of the United States under the United States Constitution, I
20 basically taxes that were placed upon the property, fruits of
21 think you were explaining what you had learned or what you
21 labor and such like that. And then later on, you have the
22 believed in that respect when we broke.
22 16th Amendment, which we'll get into, I believe, a little
23 later.
23 A.
That's cotreet.
24 Q.
All right. I asked the same question all over again.
24 Q.
25 A.
All right. And I said that in the Constitution there
25 this afternoon about some cases that you read. Did they --
Now, did you read something- you mentioned earlier
'
II
~~----------~-------------

459
those cases themselves relate to this issue of, you know, the
460
directly tax the individuals in the states, that the bill was
2 constitutional nature of federal income taxes, and did they
2 sent to the individual states, and it was up to the states to
3 play some role in your beliefs about your requirement to file
3 determine - to figure out bow they were going lo pay their
4 returns?
4 share of the bill. Some states, if they bad enough money in
A.
6 Q.
Ob, absolutely.
5 their coffers to pay their share of the bill, the citizens of
Okay. Can you explain to the jury what this Pollock
6 the states might never ever know that the tax bad been paid.
7 case was about?

8 A.
7 Other s131es, if they didn't have enough money would -- could
Well, after the- let me back up just a moment for
8 decide bow they wanred to tax their citizens. For instance,
9 the -- back to the war between the s131es and to the direct
9 in the State ofTennessee, they might decide to tax real
I 0 tax. There was a couple of things I wanted to explain on the
10 estate, might decide to tax the number of windows you have in
II direct tax. There was some limitations on direct taxation.
II a bouse, the number of fireplaces or such like that. But that
12 The federal government could tax excise taxes or indirect
12 was left up to the state. That was not a rule the federal
13 taxes, but they did have a limit on direct taxes. One of the
13 government bad, so I just wanted to clarify on the direct
14 limitations on those direct taxes was that they could only be
14 taxes. And as I started reading more and more - I was going
15 levied in s131es of declared emergency and that the tax must
15 back to the war between the states. there was a tax, direct
16 end within two years after that state of emergency ended The
16 tax levied for raising the money for the war between the
I 7 other requirement was that the cost of the stare of- of the
17 s131es, and this was done according to constitutional
18 state of emergency needed to be computed, divided among the
18 mandates, and the bill was sent to the states. The tax ended
19 states based on their inhabitance and the bill sent to the
19 not two years afrer the war, they took a little extra year 1o
20 states. I think all of us learned in school about no
20 do that, but it did end three years after the war, and from
21 taxation- no taxatioo without representation. Well, that's
21 that time on, there really was no income tax, direct tax like
22 where this came from, that the percentage of the bill for the
22 by the federal government until about 1894 that Congress
23 state of emergency that was sent to any individual state was
23 decided that they needed a little bit more money. I don't
24 done so based on the number of inhabitants. Now, one thing I
24 think that's very UIIUSual for us. We bear that all the time,
25 found very interesting was that the Congress could not
25 they want a little bit more money. And so there was an income
DIRECT- VERNICE KUGUN

461
tax of 1894 was passed. And you want me to continue?
462
Q.
There's a file folder in that blue box, there's a
2 Q.
Well, my question to you is that you mentioned --
2 number 16.
3 A.
Yes.
3 A.
Okay. I have 16. Mr. Pollock, yes.
4 Q.
- this Pollock case.
4 Q.
You just stuck something in your hand?
5 A.
Yes.
5 A.
Yes.
6 Q.
l would like to know what you learned by reading that
6 Q.
Is that filefolder 16?
7 A.
This is file folder 16, yes.
7 document
A.
Okay. The Pollock case was really as a result of the
9 income tax of 1894. Mr. Pollock worked for Farmers Loan and
8 Q.
Okay. Is that something you read and relied upon?
9 A.
Yes, it is. !tis the 339 pages ofFarmer- Pollock
10 Trust Company, and when the income tax was instituted, the
10 versus Farmers Loan and Trust.
II directors of the company began taking -- paying taxes out of
II Q.
All right
12 the profits of his stocks and his bonds. And in 1895, people
12 A.
And l can continue on with what l was saying if you
13 were still very familiar with the Constitution. Most people,
13 would like me to.
14 you know, bad read it and were familiar with it. And so he
14 Q.
15 felt that the income tax of 1894 was not a constitutional tax,
15 pages?
You mentioned that that is an extremely long case, 339
16 that it could not be levied on the income off of his stocks
16 A.
Yes, I did.
17 and bonds, so be took the case to court, be and some other
17 Q.
Did you read it all?
18 people, and it ended up all the way up at the Supreme Court
18 A.
Yes.
19 level. And in that Supreme Court decision, the majority of
19 Q.
Have you studied it?
20 the judges or the majority ruling of that case was that the
20 A.
Yes, l have. l have read it several times.
21 income tax was a tax on property and that because it bad not
21 Q.
Is it a little harder to understand than a novel?
22 been levied in relationship to uniformity, or I'm sorry, let
22 A.
Yes, it is, but not too much harder. You have to read
23 me backup.
23 it slowly, and if you read it slowly, then it begins to fall
24 Q.
Let me ask you this -- wby don't you pull out-
24 into place.
25 A.
Thank you.
25 Q.
Now, what was the refined essence of what you learned
464
463
by reading that document that you have in your hand?
2 A.
Okay. As I was -I was tempted to say a little
Q.
Okay. Let me direct your attention to that file
2 folder, 17.
3 earlier that the majority of the judges ruled that the tax-
3 A.
4 income tax of 1894 was a direct tax and because - on property
4 Q.
Yes, lay 16 aside.
5 and that because it had not been apportioned that it was not
5 A.
All right. Let me just clarify this, you just want the
6 constitutional.
6 stack of exhibits that we're using right here or -
Now, they defined the direct tax as a tax on property.
8 Interestingly enough, there was a dissenting position in this
7 Q.
Did you want me to lay this aside?
Yeah, that will be fme, or you can turn around and put
8 them up there. We're through with them right now, if you need
9 case, and this dissenting position was written by a new judge
9 space.
I 0 on the court by the name of Justice White, and in his
10 A
Okay.
II dissenting position, Justice White said no, the income tax is
II Q.
Now, you have pulled out of the blue box file folder
12 not a direct tax, it's an excise tax and, therefore, it must
12 17?
13 be uniform across the counlly.
13 A.
That's correct.
14 Q.
Now--
14 Q.
Okay. Can you tell us what that is?
15 A.
And so the case ruled the income tax of 1894
15 A
Yes, this is another court case, Supreme Court printed
16 out of the Supreme Court Recorder, entitled Frank R Brushaber
16 unconstitutional.
17 Q.
Did you read any studies that related to what happened
17 versus Union Pacific Railroad Company.
18 after the Pollock case?
18 Q.
Now, did you read this case?
19 A.
Yes.
19 A
Yes, I did.
20 Q.
Was that type ofstuffthatwas covered in this tape
20 Q.
And can you tell the jury what you learned, how this
21 had some impact or view or - impact upon your beliefs
21 series here?
22 A.
Yes, in that tape series, and also I had read some
22 regarding federal income taxes?
23 books that referred to, and there were other cases. There was
23 A.
24 the next case that rm going to talk about, had referred to
24 decision, Congress was not real happy with this decision. And
25 Pollock and some of the decisions in the Pollock case.
25 other people were not real happy with it, and so they were
I want to back up just briefly, after the Pollock

465
garnering inform-- they were garnering support to attempt to
466
Pollock case was incorrect, that income tax was not a direct
2 do another tax, income tax, and fmally, in 1913, they -
2 tax and that it needed not to be apportioned, that, in fact,
3 Congress garnered enough support to pass what we know as the
3 by virtue of its name, the term the income tax was an indirect
16th Amendment, and the 16th Amendment, I would like to read
4 tax, and the requirement under Section I, Article 1, Section 8
5 that, if I might, what it said about-- 16th Amendment said
5 of the Constitution says that indirect taxes must be levied
6 that Congress shall have the power to lay and collect taxes on
6 uniformly across the counlly. So the-- the --one other
7 incomes from whatever source derived without apportionment
7 thing that came out of the Brushaber case was that the 16th
8 among the several states. Basically, what the amendment was
8 Amendment-- many people feel that the 16th Amendment was
9 wanting to do is to get rid of the apportionment requirement
9 declared unconstitutional at that time. It was not, and
I 0 which the Pollock case had assigned to the income tax when it
10 Justice White did not declare it unconstitutional. He simply
II defined it as a direct tax. So after they passed the 16th
II defined that the constitutional restrictions of direct taxes
12 Amendment, anod!er situation -- another situation arose
12 by apportionment, indirect taxes by unifonnity still applied,
13 similar to Mr. Pollock's situation_ And this one was a Mr.
13 that had not been changed, but that the term income taxes was
14 Brushaber,and Mr. Brushaber worked for the Union Pacific
14 an excise tax.
15 Railroad Company, and again, he owned- rm sorry, he did not
15 Q.
16 work for the Union Pacific Railroad, he owned stock in the
16 significance is a case that declares the federal income tax to
Well, Ms. Kuglin, this is kind of-- you know, of what
17 Union Pacific Railroad Company and, again, they began
17 be an excise tax, of what significance is it ID you about
18 withholding taxes out of the profits of his stocks. So he
18 filing returns?
19 took this to the court - excuse me a moment. Again, this
19 A.
20 went all the way up to the Supreme Court. Now, interesting
20 definition of what exactly an excise tax was, I had to do a
Well, an excise tax -- and in order to find the
21 factors, I told you before on the Pollock case that the
21 little bit more research.
22 dissenting decision was written by a Justice White. By the
22 Q.
23 time the Brushaber came along, Justice White had become the
23 research?
24 chief justice of the Supreme Court, and he decided to write
24 A
25 this opinion himself. And in the opinion, he said that the
25 was a case entitled Flint versus Stone Tracy.
Let me stop you there, what was that, what was this
Well, the research that I did-- but the main research
~-

467
Q.
468
light of the fact that Justice White in the Brushaber case
Did you read lbat docwnent?
2 A.
Yes, I did. May I take it --
2 said lbat the income tax was actually an excise tax, and now
3 Q.
Yes, it is file number 18.
3 in Flint versus Stone Tracy, fm told that excise taxes are
4 A.
Okay.
4 those laid upoo manufacturers, upon licenses and upon
5 Q.
You can lay the other aside behind you.
5 corporations. So rm beginning to really question what is
6 A.
I need to put this back.
6 going on here, because I know that I'm told that the income
7 Q.
You have file number 18 in front of you?
7 tax is the tax rm liable for on my wages, and every -- these
A.
Yes, I do.
8 docwnents that I have come across so far tell me a different
9 Q.
Can you identify lbat for us, please?
9 story.
10 A.
Yes. This case is entitled Flint versus Stone Tracy,
10 Q.
II and it was decided in - let's see the date on this is - this
II
Let me get you to -- pull out all at once files number
19,20 and 21.
12 is in about 1925, I believe, it was an earlier case, and it
12 A.
Are we finished with five through II?
13 was in regard to excise taxes, and one of the-- or the
13 Q.
Yes.
14 decision in this case, one-- the decisions in this case that
14
MR. BECRAFT: May I approach, Your Honor?
15 defined what an excise tax was, because it was rather
15
THECOURT: Youmay.
16 confusing at that time. And in Flint versus Stone Tracy, the
16 A.
17 court said that excise taxes are those taxes laid upon the
17 Q.
19, 20, and 21. Do you have them in your hands?
18 manufacture, the sale and the consumption of commodities
18 A.
I do.
19 within the country. They're taxes laid upon the licensing of
Wbat number?
19 Q.
Now, let me-- turn to file nwnber 20.
20 certain occupations and also upon corporate privileges. Now,
20 A.
Okay. File number 20.
21 the thing that was really interesting albout the Flint versus
21 Q.
Can you identify that for me, pleasery
22 Stone Tracy Company for me in regan! to the income tax is that
22 A.
I can. This is a case that was heard in 1925. It
23 my earnings from FedEx, rm a pilot, rm not a manufacturer of
23 was - irs entitled Sims versus Ahrens, and this case was
24 commodities, I-- my job is not a job that requires a special
24 heard by the Supreme Court of our neighboring state, Arkansas.
25 government privilege to do, and fm not a corporation. So in
25 This was decided In Little Rock.

469
Q.
What significance about this particular docwnent
2 regarding your tax beliefs?

3 A
Well, in the rendering of the decision In regard to the
4 ability of a legislature or a legislative body to tax, it says
470
related to your tax beliefs?
2 A
I learned about privileges and what are privileges, and
3 the court In its ruling, one of the most significant things

4 that it said was that the Individual, unlike the corporation.
5 the legislature has no power to tax for revenue purposes those
5 cannot be taxed for the mere privilege of existing. Said the
6 occupations lbat are of common right. It goes on to say that
6 corporation is an artificial entity receiving its -- excuse
7 the legislature does have the power to declare as a privilege
7 me, owing its existence and its charter powers to the state,
8 and tax for state revenue purposes those occupations which are
8 that the individual's rights to exist and own property are
9 not of common right. Wbat this showed to me is that further
9 natural rights. The enjoyment therefore -- it's a little
10 substantiated that the income tax is an excise tax. Ifs tax
10 difficult the way they say it, it says the enjoyment of which
II on commodities, corporations and licenses, but here Flint
11 an excise tax cannot be imposed. And what this confirmed for
12 versus Stone Tracy is saying that the legislature does not
12 me a little bit more was that my job, my occupation was that
13 have the power to tax occupations of common right Well, my
13 of common right and that I have a natural right to existence
14 job as a pilot is an occupation of common right. anyone can do
14 and that a tax cannot be imposed on lbat right.
15 what I did, go out to the local airport, start 1alcing flying
15 Q.
16 lessons, building the flying time and become a pilot. So this
16 bears the number 19. Is that something you read and relied
I 7 just substantiated for me one more piece of the puzzle that
17 upon?
18 was starting to fit Into place and slarting to build a
18 A.
This is sanething I read and definitely relied upon.
19 foundation which eventually was going to lead to my decision.
19 Q.
Okay. TeU us about it
20 Q.
20 A
This case is probably my favorite case, and perllaps
Let me direct your attention to that file, number 21,
Let me direct your attention to the file folder lbat
21 can you identify lbat for us, please?
21 it's because this case actually was heard In the Supreme Court
22 A.
22 ofTennessee, the Volunteer State. And this was Jack Cole
Yes, this is Redfield versus Fisher. This was a case
23 decided by the Supreme Court of Oregon over on the West Coast
23 Company versus Alfred T. McFarland, commissioner, this is a
24 and it's dated October 24th, 1930.
24 recent case, this is not-- the other cases were 1920s, 1930s
25 Q.
What was it that you learned by reading that case that
25 and prior to that. This was a 1960s case, and so it gave me,
(:-
472
471
you know, some recent substantiation in the puzzle that was
2 beginning to form for me. And the important part of this case
that the cowt stated was that the realizing and receiving of
4 income and earnings or earnings is not a privilege that can be
you have j\L't described?

2 A.
From the Constitution, !learned that there were two
3 forms of taxes, direct taxes and indirect taxes. Indirect

4 taxes had to be levied uniformly across the country. Direct
5 taxed. It says since the right to receive income or earnings
5 taxes were those taxes which were laid upon property and such
6 is a right belonging to every person, this right cannot be
6 like that and they have to be apportioned and the bill sent to
7 taxed as a privilege, and that was like one of the final
7 the state, not the individual. Pollock, in the dissenting
8 pieces in the puzzle as far as understanding why my right to
8 case, Justice White, identified income taxes as falling in the
9 earn a living in the form in which I chose was not a privilege
9 category and class of taxes known as indirect taxes and
10 that could be taxed.
to therefore must be uniform. Brushaber in the Justice White
II Q.
II reconfirmed this. Flint versus Stone Tracy had defmed for me
When was it that you engaged in this process of reading
12 and studying these cases that you have just mentioned?
12 what an excise tax was, and l realized that my occupation did
13 A.
I'm sorry. say that again.
13 not fall under the categories of manufacturing, corporations
14 Q.
Okay. What's the time frame when you were reading this
14 or licenses. Redfield versus Fisher identified that as a

15 natural human being, an individual that had the right to make
15 stuff?
16 A.
Oh, the time frame in this was '92, once after l had
16 a living could not be taxed and then, let's see Jack Cole
I 7 first heard about the issue of tax, the truth in taxation
17 versus McFarland was the clincher, l had a right to earn a
!8 movement in the Libertarian party, and 1990 through '95.
18 living, I and every other American citizen has a right to earn
19 Q.
Well, definitely before April 15th of 1996?
19 a living and that right cannot be taxed, and that really was
20 A.
Absolutely.
20 the final, l guess. piece of the puzzle that said, you know.
21 Q.
You had read all these cases?
21 something is amiss here. And l decided at that point in time
22 A.
Yes.! had.
22 that I was going to really t!.ke a stand on this and start
23 Q.
Can you give us a refined essence of your conclusion
23 seriously asking questions. l had been doing a lot of the
24 that you drew from reading and your stlldying of the
24 research, but I hadn't really been asking questions about it.
25 Constitution. its taxing power.; and the series of cases that
25 And the-- of course, the IRS. each year-- I had been paying
474
473
Ladies and gentlemen, we're going to start at
into taxes through my employer throughout all of this time,

2 and I - up until '92 I had been filing my l 040 forms. But I
2 9:00 o'clock. That's a pretty good start time. You have
3 made the decision that I was not going to file a 1040 form.
3 to be here at 8:30, hopefully have had your snack and we
4 and then I would start asking some very serious questions of
4 will be ready to go. We should be ready to go right at
the organization who I thought should have the answers.

6 Q.
Let me get you to pull out file folders I through 4A.

lHE COURT: Counsel, it sounds like we're
8 getting ready to be more specific on some questions, is

9 that right?
5 9:00. I don't think anybody is going to come about any
6 more repairs on my house tomorrow morning, although if

7 they do, I will stay and talk to them, I got to tell you
8 that. Is everybody okay on their -- we have no electrical
9 problems here, right, everybody is okay, and you don't
10
MR BECRAFT: Yes, that's correct.
10 have any insurance problems, you got all your repairs
II
THE COURT: I think I would rather have all of
II taken care of? All right. We're all working on it
Well, don't talk about the case among
12 this on the same day so that it will be more easily
12
13 followed.
13 yourselves. Don't let anybody talk with you about it
14
MR BECRAFT: Your Honor, we're here at the
15 pleasure of the court.

16
THE COURT: Well, I think that's --I wish that
17 was true, but, anyway, that's a different thing.

18
THE WITNESS: You have made it very
19 pleasurable. Thank you, sir. Thank you, Your Honor.

20
THE COURT: We're here because we have a case
14 You heard a lot of references to cases and Supreme Court

15 references and that sort of thing, and I know actually for
16 the people who are really computer driven and get home and
17 get on that computer, it is tempting, and rm just going
18 to remind you don't try to look anything up. That would
19 be very inappropriate. I will give you all the
20 information that you need from the law side in printed
21 to try, and thafs what-- I think we better do that.
21 form and also orally when we have the case submitted, and
22 That will make more sense tomotrow because otherwise we're
22 the government and the defense will argue the facts, so
23 going to start this portion of the testimony and then Mr.
23 don't do that. Don't speak to anybody on either side or
24 Murphy is going to start examining, and if we break it up,
24 anybody who is associaled with any side. You should avoid
25 it will be confusing, we don't want to do that.
25 them. And if anybody tries to talk with you, of course,

475
476
you should report that to one of the court security
THE COURT: Oh, I understand. and irs possible
2 officers, a member of my staff or directly to me.
2 to mislay something.
And, again, continue to not watch anything on
All right. I need to ask a couple of questions
4 television, read anything in the newspaper or listen to
4 about the instructions. One question, I just want to ask
5 anything on the radio that might be about this case or
5 Mr. Murphy, it is vety clear to me on Counts 2, 3, 4, 5,
6 cases like it. Well, continue to keep an open mind We
6 6, 7, 8, 9 --I'm sorry, 2, 3, 4, 5 and 6, that you are
7 have still only heard, frankly, a portion of the case and
7 relying on the failure to file - the information on the
8 you need to keep an open mind until you have heard
FormW-4?
9 everything in the case, the final arguments of counsel,
I 0 the final inslructions on the law and, of course, have had
10
THE COURT: As the affirmative act?
I I a chance to go back to the jury room and then discuss the
II
12 evidence among yourselves, and then make up your mind.
12
THE COURT: That's perfectly clear. And what
!3
13 rve been ttying to figure out, you probably knew what I
Ladies and gentlemen, thanks Vety much. We
!4 will let you excused, we will see you at 8:30 tomorrow.
14 was ttying to figure out - and we will let you have a
15 We will start in here at 9:00. Thank you.
15 seat if you like -- is what is the aft'lt1IIative act in
!6
(Jury out at 4:50p.m.)
16 Count I. and rm not sure-- it can't be a failure to file
17
TilE COURT: I have a couple of questions I want
17 and it can't be a failure to pay.
!8 to ask you.
rm going to let you keep your materials, and
!9 Mrs. Saba will re-check, because if we find something, we
MR. MURPHY: Judge, what it is going to be--
18
19 and I don't mean to interrupt -- what it is going to be is
20 will get it to you. I have a feeling that-- I mean
20 that '95, what do you call it, W-4?
21 u.orually they do not remove anything from the courtroom,
21
THE COURT: Tbere's a '95 W -4 also?
22 and usually when we leave it, it is locked except for the
22
MR. MURPHY: Yes, sir, and that was
23 custodial folks.
23 in1roduced --
TilE WITNESS: My mind, I could have vety
24
25 well-
24
THE COURT: That was, that was. Its just not
25 stated and I wanted to be sure. So we're relying on W-4s

477
478
throughout?
failure to file is different, of course.
THE COURT: Okay. That was the first question.
THE COURT: In the Alamo case, we gave both
4 The second question was, is the government going to oppose
4 failure to file charges and other charges. It was not a
5 the giving of the lesser included offense charge? You
5 7201 case. Well, will you think about that?
6 know, we usually don't do that, and I think there's some
7 authority that says that we don't have to give that In
THE COURT: I kind of need to know that fairly
8 other words, I don't have to give lesser included offense
8 early.
9 language, but- but what does the government want to do?
10
MR. MURPHY: Judge, you know, I have been so
II busy getting ready for this thing, I haven't really
MR. MURPHY: I will let you know fiiSt thing in
10 the morning.
II
THE COURT: I'm not real sure about that. And
12 thought about it. Part of the problem you have got is
12 then on some of the things like the Privacy Act and so
13 some of the case law that -- I have read some cases on it,
13 forth, I haven't heard anything, we haven't gotten all the
14 you can have a failure to -- failure to file and evasion
14 way through the material, you know. I mean I view this as
15 are two different crimes.
15 a pretty straightforward good faith question, good faith
16
TilE COURT: They're different erimes.
16 defense, and whether the jury agrees or not is a jury
17
MR. MURPHY: Because you can have an evasion
17 question.
18 with the filing.
18
19
TilE COURT: Well, sure, you can.
19
THE COURT: But what is your position on this?
20
MR. MURPHY: Bogus tax.
20
MR. MURPHY: Well, Judge. I don't think the
21
TilE COURT: False information conlained in the
21 jury ought to be inslructed on all this other Jaw they
22 return, misslatement of various - all sorts of things can
22 have cited in the jury inslructions for this reason: It
23 bedoneinareturn.
23 doesn't matter what the law is. What ma111:rs is her good
24
MR. MURPHY: Sure.
24 faith belief.
25
TilE COURT: That create a fulse filing. A
25
THE COURT: That's correct. That's correct. I
......

479
2 final arguments on that right now. But that-- that's
3 kind of been the focus. I'm trying to get a set of
3 thought process.
4 instructions that we can worl< from.
TiiE COURT: Well, I don't want to get into your
MR. BECRAFT: Okay. I'm just telling the
MR. MURPHY: Right.
mE COURT: I'm going to go back and refer to
480
possibility I might just say forget him.
think you're right on that. I'm not going to take the
5 court.
7 the W -4s throughout, and that's where I'm going to be on
TiiE COURT: I think you're warning Mr. Murphy
7 and me that we may be to the jury pretty quicldy, and I do
8 that. I suppose you could argue other things, and so I'm
8 appreciate that Okay. Gentlemen and ladies, we will see
9 not going to -- I'm giving a little more instruction on
9 you tomouow at9:00 o'clock.
I 0 what is an affirmative act of evasion. I'm just going to
10
MR. MURPHY: Thank you, Your Honor.
I I give a little more instruction on that and make it
11
MR. BECRAFT: Thank you, Judge.
12 perfectly clear that omissions are not acts of evasion.
12
TiiE CLERK: All rise.

(Court adjourned at 4:55p.m.)
13
M:R MURPHY: Yes, sir.
13
14
14
15
MR_ MURPHY:
And I have I have no objection to
16 that
15
16
17
THE COURT: It's a little helpful to me.
18
flue we going to have auy witnesses after -
19
MR_
BECRAFT: Your Honor, I think we have got
17
18
19
20 one witness that - we were going to bring one in, but I
20
21 think we have got enough stipulation on that or at least
21
22 Mr. Murphy is not going to object, and I was going to meet
22
23 with one other witness tonight, but, you know, I might
23
24 after- he wouldn't be-- his name is Don Winfield, he
24
25 wouldn't be but about 30 minutes, but there's a distinct
25
482
IN mE UNITED STATES DISTRICT COURT
APPEARANCES
FOR THE WESTERN DISTRICT OF TENNESSEE

WESTERN DMSION

Plaintiff,
vs.
NO. 03-20111-MI
VERNICE KUGLIN,
Defendant.
TRIAL PROCEEDINGS
BEFORE mE HONORABLE JON PHIPPS MCCALLA, JUDGE
AUGUST 6, 2003
VOLUME ill
BRENDA PARKER
OFFICIAL REPORTER
167 NORm MAIN STREET

UNITED STATES ATTORNEY

209 LINCOLN STREET
HUNTSVILLE, ALABAMA 35801
483
484
WITNESS INDEX
WITNESS
EXHIBIT INDEX
PAGE LINE
EXHIBIT NUMBER
PAGE LINE
VERNICE KUGLIN
DIRECT EXAMINATION (CONTINUED)
Exhibit Nlllllber 28
2-3-53 Doclllllent
506 16
BY MR. BECRAFT: ....................... 499 II
1997 Annual Report
507
CROSS EXAMINATION
Exhibit Nlllllbers 30
BYMR.MURPHY: ........................ 568 19
Exhibit N lllllber 31
1040 Insttuctions 1993
508
1997 26 CFR 5601.602
508 22
BY MR. BECRAFT: ....................... 627 13
1998 26 CFR 5601.602
508 24
1999 26CFR 5601.602
509
I040 Instructions I 992 507 24
Exhibit Number 35
Cole v. McFarland Case
509 23
1975 1040 Instructions
518 23
538 II
Exhibit Number 37
IRS Bulletin
1993 Form 2555 Instruction 5
1993 Form 2555
538 IS
Exhibit Number 40
1916 Treasury Decision
544
9
4
13
ExhibitNumber41
October 18. 1995 Letter
558
Exhibit Number 42
November 25. 1995 Letter
558
Exhibit Number 43
Flora Case
571
IS
1992 Tax Return
574
1988 Form 1040
576
1990 W-4 Form
578 13
Blank Form 1040
580 12
Exhibit Number 48
October 31. 1995 Letter
583 24
Exhibit NUIIlber 49
June 16, 1997 Letter
584 21
485
486
Exhibit N lllllber 50 June 16. 1997 Letter
585 12
June 22. 1999 Letter
585 20
June 28, 1999 Letter
586 25
July 6. 1999 Letter
587 13
WEDNESDAY MORNING & AFTERNOON

2
3
AUGUST 6, 2003
The trial in this case resllllled on this date.
4 Wednesday, August 6. 2003. at 9:00 o'clock a.m., when and
October 30, 2000
588 II
5 where evidence was introduced and proceedings were had as
Tax Returns
601
6 follows:
CFR Passages
605
1993 Instructions
621
1995 1040 Inslructions 625 24
8
9
10
MR. MURPHY: Judge. Ms. White is not here. but
II she has gone to get some exhibits.

12
THE COURT: Do you need to wait on her?
!3
MR. MURPHY: No. we don't need towaitonher.
14
MR. BECRAFT: Your Honor, could we take up a
15 matter, an evidence question before we bring in lbe jury?

16
THE COURT: Sure.
17
MR. BECRAFT: I anticipate that Mr. Murphy has
18 got a lot of objections to some of the proposed exhibits

19 that we're going to offer. With reference to that
20 category of exhibits, I'm proceeding with this in mind.
21 and I would like the court to either approve or
22 disapprove. It may take some arguments. and I drink it is
23 going to be more beneficial for us to argue the bulk of
24 these motions outside the presence of the jury maybe
25 before a break or after a break or sometime after the
....
I
487
488
defendant gets off the stand.
to offer are letters from a CPA and an auomey, I believe
TIIE COURT: Have you shown the materials to Mr.
2 it is, that represented Ms. Kuglin, and our position would
3 Mwphy'?
3 be that those are clear hear.;ay. They're not-- they
4 don't fit the state of mind exception.
MR. BECRAFr: Your Honor, I gave the government
5 premarked exhibits.
6
THE COURT: Are they letters that she claims to
MR. MURPHY: Yes.
6 have relied on?
TIIE COURT: I think the answer is yes. Do we
MR. BECRAFr: Yes.
have objections.
9
MR. MURPHY: Well, Judge, here is the problem
MR. MURPHY: Judge, as I said yesterday, and
9 I don't think she can claim to rely on those letters,
10 just generally, my objections generally fall into three
10 because at the rime they were in the midst of a
1 1 categories. There are Supreme Court cases and IRS
11 conlroversy over the tax matter, and if you look at-- if
12 materials, and I would be of the opinion that those are
12 you look at, I think irs 803, the state of mind
13 admissible.
13 exception, it clearly says that you can't offer
14
TIIE COURT: Are admissible?
14 something -- a statement of belief to prove that belief.
15
15 And I would submit that's what you're doing in this case.
16
TIIE COURT: All right.
16 It's 803(3), Your Honor.
17
MR. MURPHY: And then there are, for lack of a
18 better word, tax protester type materials that may or may
17
TIIE COURT: Oh, rm not looking for that rm
18 looking for the good faith -- bases for good faith. I
19 not have extensive legal citations. In fact., one of
19 don't know whether or not a person can rely on- are
20 those, it talks about jury nullification and urges people
20 these - I just have to look at the two letters, whatever
21 to nullify verdicts. Clearly, some of the text of that
21 they are, and see whether they're something on which a
22 may come in, but the document itself wouldn't., and I think
22 person can rely, and I haven't seen those.
23 the defendant would be allowed to read from it., but I
23
24 think we need to know in advance what portion she is going
24 them now?
25 to read. And the last group of materials that they seek
25
MR. BECRAFT: W mud the court like to look at
TIIE COURT: Sure.
489
490
MR. BECRAFr: Either my copies or hers. Ms.

2 Kuglin, have you got 43, 44, 45, 46?
exception. Tbese are hearsay. And- and - clearly, so

2 as a general proposition, they're not admissible.
TIIE WITNESS: Yes, I do.
3 Sometimes a person can obtain an opinion, for example,
MR. BECRAFr: May I approach the witness, Your
4 from - well, from a CPA, and the CPA can state that they
5 Honor?
6
5 have determined that no tax is owed on a particular -- or
TIIE COURT: Why don't you hand them to me, rm
7 the one that has to look at them? Oh., okay. You're
6 as to a particular individual, and that they state that

7 that as a CPA in a professional capacity and advise the
8 right, it doesn't matter. I don't think this Jetter from
8 client that they need not pay any tax on Ibis particular
9 Thomas Roberts states an opinion in which a person can
9 point.
10 rely. This is the one dated November the 26th, 1997.
10
11 This one of-- I don't think Ibis one of December the 8th,
11 letters, Your Honor.
12 1997 also states an opinion on which a person can rely or
12
13 even suggest that there's an opinion attempting to be
13 they're not opinion leuers. Had they been opinion
MR. BECRAFr: These are not offered as opinion
TIIE COURT: Well, that's what I understood,
14 stated on which a person can rely. I don't think Ibis one
14 letters, they would be in a different category, tha(s
15 of January the 20th, 1997 also states an opinion upon
15 lrUe.
16 which a person could rely from a professional. They just
16
17 talk about request for document which are not opinions on
17 information to the court on this point?
18 which a person can rely. Well, the letter from Mr. Pope
18
TIIE COURT: Sure, sure.
19 also does not state an opinion upon which a person can
19
MR. BECRAFr: I had lined up to deal with the
20 rely, as far as I can tell.
20 authenticity question. These leUers come from Florida,
21
MR. BECRAFr: Your Honor, can I explain the
MR. BECRAFr: May I offer additional
21 and I had a secretary in an office that was going to come
22 letters?
22 up and prove the mailing of the 1eUers. I don't think
23
TIIECOURT: Excuse me?
23 the government is making an objection, we have agreed,
24
MR. BECRAFr: And the pwpose?
24 although the court is hearing about this for the first
25
THE COURT: Well, they have to fall into an
25 rime, that the question doesn't relate to authenticity.
~------------~-------------
492
491
apparently. and we will come back and look at this. but I
What we're offering them for is not for opinion or

2 anything else, but what -- the point that we're offering
2 think probably-- well, we will come back and talk about
3 them for is that at Ms. Kuglin's instructions, these
3 it for a second
4 gentlemen- they're tentatively marlced 43, 44, 45, 46,
(Recess taken at 9:15 until 9:20 am.)

niE COURT: All right. Anything else from the
5 just the numbers that appear on the documents, they're
6 offered for the purpose of showing that M. Kuglin said or
6 United States on these letters?

7 asked questions through her lawyers to the Internal
8 Revenue Service to answer, and she also makes statements,
niE COURT: Anything else from the defense?
9 there is letters-- there's statements in here we're
MR. BECRAFT: Yes. Your Honor. These four
!0 willing to pay, the only thing we want to do is we want to
10 letters, there is a series of documents that I consider to
II have answers to our questions. For example, you know,
II
12 just to demonstrate to the court, the one that is labeled
12 have already been admitted in evidence. it's the exempt
be the core of the defense. First is the documents that
!3 43 that is dated November the 26th of'97 by Tom Roberts,
13 Form W-4 dated December. 1995. that is authored by Ms.
14 it says specifically kind of at the bottom of the page--
14 Kuglin. Thereafter, in order of importance about exhibits
[5
THE COURT: I have read it already, sure. Our
15 that we're going to cover this morning are two document
16 client is not refusing to pay and in fact, will pay any
16 that she submitted herself in October and November of
17 lawful tax owed once the Internal Revenue Service complies
17 1995. Subsequent to that time, we had this series of
18 with our request as outlines in this document and, of
18 letters Ms. Kuglin was asked or asked these people, Tom
[9 course, it begins earlier, since our client has never been
19 Roberts and Mr. Pope to write letters on her behalf to the
20 given documents by the IRS, which clearly state specific
20 Internal Revenue Service asking her fundamental questions
21 taxes the IRS claims - see, !hats not how it works,
21 and, likewise, at the same time offering to pay.
22 unfortunately, or however you want to look at it. In our
22
23 system, the IRS doesn't send them a bill, you send them in
23 position that it goes to her state of mind, which is the
Now, under -- that being the case, it is our
24 materials which are reported
24 most important factor that I think the jury has got to
25
25 decide in this case. She read these letters. She said
I need to go take a phone call in the back,
494
493
excluded by the hearsay rule even though the declarant is
that she would make an offer- she would pay the IRS, she
2 had no objections to paying the lax, she just wanted her
2 available as a witness; three, then existing mental,
3 questions answered. That, Your Honor, goes to reliance,
3 emotional or physical condition. A statement of the
4 state of mind as well as intent, and these - these
4 declarant's then existing state of mind, emotion,
5 letters are real important for the intent question, what
5 sensation or physical condition such as intent, plan,
6 was her frame of mind. She wanted her questions answered,
6 motive, design, mental feeling, pain and bodily health,
7 she was willing to pay, and to me, that- those are real
7 but not including a statement of memory or belief to prove
8 important facts that demonstrate a lack of intent to
8 a fact remembered or believed unless it relates to the
9 commit tax evasion.

!0
c~~~
MR. MURPHY: Judge, if you look again at
9 execution, revocation, identification or terms of

!0 declaranrs will. So this particular exception to the
hearsay rule does not apply to the letters submitted from
II 803(3), this is being offered as a statement of belief to
[[
12 prove the belief, and it's not admissible. We're-- where
12 Mr. Roberts and from Mr. Pope. Objection by the United
13 these letters emanated from was an IRS proceeding to levy
13 States is sustained
14 on the defendant's property. and what that - what that
14
All right. Anything else?
15 would tend to do, I would submit to the court, is create a
15
MR. MURPHY: Yes, sir, Your Honor, you wanted
!6 situation where there was a motive to lie, and the
16 me to advise the court what our position would be as to a
17 reliability factor that you typically have in a hearsay
17 lesser included offense.
18 statement, because it's on the spot type of thing just
18
rnE COURT: Yes, I did.
19 wouldn't apply, and, therefore, we would submit that they
19
MR. MURPHY: And our position is going to be
20 ought not to come in. They're just hearsay, there's no
20 that the jury should not be charged with the lesser
21 way around it.

22
THE COURT: Well, the exception thats asserted
21 included offense given the nature of the charge in this

22 case.
23 by the defense is 803(3 ), as I understand, and the
23
rnE COURT: Anything from the defense on that?
24 government simply argues that it doesn't apply. That rule
24
MR. BECRAFT: Well, I offered one, I offered a
25 as to hearsay exception says the following are not
25 lesser included instruction.
495
496
.MR. BECRAFf: One other matter, Your Honor,
THE COURT: Right, but-
.MR. BECRAFf: I think under the facts of this
3 point is that should we, on a piece-meal basis, handle the
4 committed by a willful fuilure ID file. My position is
4 rest of the exhibits or should we take them up outside the
5 that terminology -just by the plain terms of the
5 presence of the jury was my offer?
6 indictment itself includes the lesser included offense and
7 willful failure to flle, 7203.
THE COURT: Well, you know, the- I haven't
7 looked at each of the-- Supreme Court cases and materials
.MR. MURPHY: But, Judge, if you look at the
9 defense they're offering, as I understand it, what the
8 from the Internal Revenue Service can be used. I mean

9 they're published materials, they're available for
10 witness has testified to. she had no duty to file a tax
10 everybody, and the law allows an individual to rely on
II return, and thafs just not consistent with the defense
II Supreme Court decisions, it allows individuals ID rely
12 that's offered.
12 upon IRS materials, and so those can be used
13
13
THE COURT: Well, there is discussion about the
14 inclusion of lesser included offense in pattern jury
As to materials by other people or entities,
14 they fall in the same problem as any other type of
15 instruction 8.07 of the Sixth Circuit pattern jury
15 hearsay, and unless it is a learned treatise on tax law,
16 instructions, and this does not appear to be a case where
16 certainly read from and not necessarily have been
17 the court should include the lesser included offense
17 admitted, but refer ID that sort of material, but it has
18 instruction, so fll sustain the position by the United
18 to meet some test to show that it is -- that it falls in
19 States.
20
19 the an exception of the hearsay rule. Otherwise, we would

There's some discussion of this in the notes
20 get up and read from the Marvel Comics or the Wall Street
21 contained with- or the comments contained with 8.07, and
21 Journal either one, and it would not be - although parts
22 I do agree with the United Slates that this is not --
22 of the Journal- part of the Journal are judicial notice
23 certainly not required and it's not appropriate in my
23 materials like the interest rate portions, but articles in
24 determination in this case. That takes care of that
24 the newspaper would not be admissible themselves. So I
25 point.
25 think that- we know that they will not be admissible.
498
497
Now, that's our situation. If-- how much material do we
2 have like that?
2 before the - we dealt with the letters. The only other
3 case, the indictment alleges, if part of the offense is
MR. BECRAFf: Well, Your Honor, I slipped to
4 the court a proposed exhibit list. I have committed a
THE COURT: We have covered the things that you

2 listed as 43, 44, 45, 46. Ms. Kuglin's own correspondence
3 to the agency typically not admissible as a general
4 proposition because everybody can write their own material
5 grave error by numbering mine in advance. Bad habits stop
5 and then would be able to introduce into evidence, but
6 slowly, Your Honor. But you can take a look at the
6 sometimes it's received because there's no opposition, as
7 exhibit list. and what I will do -- I think it's something
7 an admission, for example. So I don't know what the

government will say about those things.
8 we can probably take care of in short order outside the
.MR. BECRAFf: rll do whatever the court wants.
9 presence of the jury is all rm saying. I could lay the
10 foundation for some of these documents. rm not going to
10 I will move them into evidence as we take them up.
II offer a lot of these. I will take into consideration what
II
12 the court has already said and move some of that in, but
12 come up? I did get the list though, thanks.
13 there's some that I think probably require a separate
13
Are we ready?
14 consideration, separate arguments that I anticipate coming
14
.MR. BECRAFf: We are, Your Honor.
15 from Mr. Murphy.
THE COURT: Why don't we deal with them as they
15
COURT SECURITY OffiCER: Yes, Your Honor.
16
17 these various opinions, interesting question about using
17
THE COURT: Everybody can be seated. rm sorry
18 the ones that are very old, but I think you can clarify
18 we're starting a little late. The - we did take up some
16
THE COURT: Well, you have a lot of things,
19 them. CFR. there's no question aboutlbat, is there, Mr.
19 documents that -- as to which objections could be dealt
20 Murphy?
20 with in advance and ruled on those rather than our doing
21
MR. MURPHY: No, sir, Your Honor, I believe
22 that's admissible.
23
MR. BECRAFf: And we have some forms, but then
21 those at side bars. There are going to be some other

22 documents that as they come up, we will probably try ID
23 deal with at side bar. If we can't do it quicldy, we will
24 there's a lot of other material that is not IRS and
24 take another break and deal with them. That way, we're
25 everything else.
25 not causing you to have to sit out here while we're trying
Lc::;

500
499
to sort through the objections under the Rules of
you a document thafs called file folder one 0
2 Evidence.
2 A.
Yes.
3 Q.
Okay. Now, is this something that during that time
The Rules of Evidence do dictate which type
4 documents can be receiv<rl and the reasons that they can be
4 frame that I just mentioned, is this something that you read
5 received, and it does take a little bit of time to go
5 and reli<rl upon?
6 through each document to make sure they can come in or
6 A.
7 not. I think we're ready to proceed
7 conventions and listening to different spealcers, I picked up
MR. BECRAFT: May it please the court.
THE COURT: Go right ahead.
10
DIRECT EXAMINATION (CONTINUED)
fliers, information, newspaper articles and such lilce that

9 which substantiate or which discuss - did not subslantiate,
10 but discuss<rl and rais<rl questions which became kind of a road
11 map for the rest of my study.
II BY MR. BECRAFT:
12 Q.
Yes, it is. As I was going to the different
M. Kuglin, yesterday we had finished a particular
12 Q.
Is there something that you read in this-- identify
13 topic, and l would like to move on to a different aspect of
13 forme, please, this number one.
14 your testimony.
14 A.
15
Between 1992 and early 1995 or maybe late 1995. can you
The f!TSI exhibit or this first document is entitl<rl
15 Who Is Required To File A Tax Return. Ifs written by a lady
16 deseribe for us what you were doing in reference to generally
16 by the name of Claire Kelly, and she was a colunmist who had
17 studying the income tax laws?
17 done a lot of research in the arena of taxation.
18 A.
Well, after I had review<rl the cases and the
19 constitutional restrictions on taxation and the other study
18 Q.
And what was the general theme that you gathered from
19 this and how did it relate to your beliefs?
20 materials I had, l had come to the conclusion that there was
20 A.
21 definitely a question about whether or not l was liable for
21 yesterday in regard to din:ct taxes, indin:ct taxes. She
22 the income tax. So I decid<rl it was time that I really delve
22 quoted Supreme Court cases such as the Brushaber case. the
The general theme was much of what I had discussed
23 into the tax code itself and the 1040 form, which is a
23 McFarland case and just a little bit more explanation as to
24 document that the IRS has aslced Americans to complete.
24 the fact that the source of income was very. very important in
25 Q.
Let me stop you right there. Do you have in front of
25 deciding whether or not that income fell in the category of
DIRECT- VERN!CE KUGLIN
502
501
direct taxes which the f<rleral government could only levy a
2 portion - excuse me, through apportionment and send the bill
that there are taxpayers and there are tax payers. Taxpayers
2 are those which are entities of the government, corporations,
3 to the state. and that - which was considered the source
3 trusts and things like that, and then there are individuals
4 which fell under excise taxes or indin:ct taxes which had to
4 who are tax payers. They pay the indirect taxes, the gas
be uniform throughout the state.
5 taxes, the wheel taxes and such like that. So it gave me a

6 much clearer understanding that not everybody is considered a
6 Q.
Now--
7 A.
Or the country.
7 taxpayer.
8 Q.
Could l get you to identify the next document that has
8 Q.
9 a two on it?
I 0 A.
This document is entitled Who Is a Taxpayer? And this.
11 again, is an article written by Claire Kelly. You want me to

12 continue?
l3 Q.
Yes, tell us what you gather<rl from reading that
Let me direct your attention to the next document that
9 has a three on it.

I 0 A.
This document is entitloo -- excuse me -- this document
11 is entid<rl Deceptive IRS Code Words, and it was publishoo by

12 an organization entid<rl the Free State Constitutionists. And
13 this tallcs about the words income, the word person. the word
14 document.
14 taxpayer. shall and must. And it discusses the fact that the
15 A.
15 common everyday usage of certain words is not necessarily the
One of the first things - it starts out by saying the
16 revenue laws are a code or a system of regulation, a tax
16 legal usage of that word. And I would say an example that l
l 7 assessment and collection. They relate to taxpayers and not
17 found in my personal life that if somebody in my generation.
18 to nontaxpayers and what this plac<rl in my mind was the idea
18 somebody wa!lced up to me and said, Ms. Kuglin, you are bad.
19 that not every one is a taxpayer, and the article goes on to
19 Well. l didn't have a very good feeling because l considered
20 say that the income is allaying of an excise tax upon a
20 that to be a derogatory statement towards me. The younger
21 taxable event. that the income tax law or- that was
21 generation. someone comes up to me and says, Ms. Kuglin, you
22 initially debated in 1909 and then passed in 1913 was actually
22 are
23 originally named the corporation tax of !909. And it goes --
23 to me, they actually are paying me a compliment, and so we
bad. then I understand that they're not being derogatory
24 the article goals on and quotes some of the court cases that I
24 have to undersland what the semantics of words mean. and
25 tallced about yesterday. Redfield versus Fisher. and explained
25 that's what this document really laid out for me. The idea
504
503
that income is determined by where the soun:e is, that the
l A.
4A. This is a newspaper -You acquired this during your early days in which you
2 named person can mean an individual, it can be a corporation,
2 Q.
3 it can be a trust, a savings and loan association, a
3 began your study?
4 homeowner.; association. The per.;on can either be a live being
4 A.
5 or it can be an artificial entity, and - so you have to
5 Q.
And you read it?
6 understand the context in which the code or the regulations
6 A.
Yes, !did.
7 use the term person. Taxpayer, again, as Claire Kelly defmed
7 Q.
Did you acquire certain information by reading the
Yes, yes, I did.
document?
8 taxpayer could either mean a taxpayer, corporation, entity or

9 person, or it could be a tax payer, somebody who voluntarily
9 A.
I 0 pays their -- you know, pays the indirect lax, sales taxes and
l 0 another document. I did not order the document, but what
Yes, I did. This was really an advertisement for
I I such. Then they come to the word shall and must. Now,
11 struck me was that this was in USA Today, a fairly prominent
12 typically, we think that the word shall is mandatory. But
12 paper, it was an advertisement that an attorney at law took
13 there are com1 cases, and it covers - let me read through
13 out, a man by the name of James Knowles, and it says that
14 here just quickly. Well, rm not placing my eyes right now on
14 James Knowles spends his year penetrnting the owners internal
15 the court cases that talk about this, but it said that the
15 Revenue Service Code to find that most likely you don't have a
16 words must and shall are applied in relationship to a
16 liability to pay a set of taxes. He's a member of the
17 liability or a requirement. In other words, if you have a
17 California bar and has practiced law for 34 year.;, since his
18 liability, then you must. But then if there is no liability

19 or requirement for specific
tax. but a per.;on voluntarily
20 decides that they want to go ahead and pay
i~
then it is used
18 graduation from prestigious Hastings School of Law.

19
The importance of- or what I found in this
20 information was that it wasn't -- I was not the only per.;on
21 in the term may. Yes, you may be-- you may do whatever you
21 asking or beginning to question my liability status, that
22 want to. If you feel that you want to pay a lax that you have
22 there were attorneys, there were people who were publishing
23 no liability for, there's nothing that stops you.
23 this information and asking the questions in national
24 Q.
24 newspapers and such like that.
Let me move on the next exhibit, number- it has a
25 Q.
25 number on it, 5 or 4A.
Let me direct your attention to a document that is
506
505
the :front.
1 labeled 4A.
2 A.
This document is entitled Must You Pay the Income Tax.
2 A.
Yes.
3 And this - I'm not quite sure how I attained it, but it was
3 Q.
I believe you talked about that yesterday.
4 from the Mutual Assistance P Jan, which is an organization out
4 A.
Yes.
5 in Pima, Arizona at that time, and this was during the same
Q.
6 time period as I was trying - gathering information trying to
6 A.
7 find clues to the answer of the liability of income tax. And
Is this something you read and relied upon?

Yes, it is. It was one of the fiiSt documents I got.
MR. BECRAFT: Your Honoc, at this time, I would
8 it states: Liability is established by voluntlry assessment.
8 move for the admission of the document she has in her hand
9 Now, some of the cases that were mentioned in this-- and this
9 that I have a big 5 on in the lower right --left corner.
l 0 article actually directed me to the - to finding the
10
MR. MURPHY: No objection, Your Honor.
II Brushaber case, the Flint versus Stone Tracy case and some of
11
THE COURT: It is received as the next numbered
12 the others. And it says that before World War II, payments or
12 exhibit.
MR. BECRAFT: Your Honor, can I approach and
13 profit received by individuals in even exchange for their
13
14 labor were not connoisseured to be subject to income taxes.
14 give it to the clerk?
15 And, of course, we know in Brushaber, it says - Brushaber
15
THE COURT: Yes, it will be 28.
16 defined the word income because Congress had not defined it.
16
17 As a matter of fact, in the debates, congressional debates on
17 2-3-53 Document.)
THE WITNESS: Your Honor, is it all right if I
18 the 16th Amendment, which are very fascinating, I would
18
19 encourage everybody to read. Congress - the legislature could
19 put these papers right here?
20 never come up with a definite defmition of the word income as
20
THE COURT: Sure, that's no problem at all.
21 applicable taxes, and it was understood that they were
21 Q.
22 considered to be excise taxes and, therefore, fell under the
22 big6 on.
Yesterday, you talked about the document that I have a
23 uniformity clause.
23 A.
24 Q.
Let me direct your attention to -- Jet's go back to
24 Q.
Yes.
Is this something you read and relied upon?
25 something we covered yesterday, the document that has a 5 on
25 A.
Yes, it is.

508
507
Q.
Does it appear to you to be an official document?
It does. Actually, this is a copy of the official
2 A.
3 government document.
4

2 1040 Instructions 1993.)
MR. BECRAFf: May l approach the witness, Your
MR. MURPHY: Ibavenoobjection, YourHonor.
4 Honor?
THE COURT: All right. We will make that 29, I
THECOURT: Youmay.
6 Q.
6 think.
Can I get you to lake a look at the document that bad

THE COURT: 29.
8 them?
9 A.
[ bave them.
I 0 1997 Annual Report.)
I 0 Q.
Those are official government documents, is that
II Q.
II correct'
Do you bave in your band the ones that bave 6, 7 and
7 the-- the series of documents that bave 13, 14 and 15 on
12 8--7,8 and 9, I'm sorry. No, 7 and 8.
12 A.
Yes, they are copies of the 26 CFR, Chapter I.
13 A.
7 and 8, I was getting a little confused here.
13 Q.
And we discussed those yesterday?
14 Q.
Correct me if I'm wrong, these are parts of the '92 and
14 A.
Yes, wedici
15 '93 instruction book for Form 1040?
15 Q.
And you relied upon them?
16 A.
Yes, they are.
16 A.
Yes, l did.
17 Q.
You relied upon them and you covered the substance of
17
I 9 A.
Yes, on the fact that it was a voluntary tax system
MR. BECRAFf: Your Honor, [move for the
21 admission of these two.
MR. MURPHY: [ bave no objection, Your Honor.
22
MR. BECRAFf: Your Honor, [move for the
18 admissions of the documents that bas 13, 14, and 15 on
18 them yesterday?
20
19 them.
20
21
THE COURT: Certainly. They will32, 33, 34.
22
23
TilE COURT: It's 30 and 31.
23 199726CFR5601.602.)
24
(Exhibit Numbers 30 was JDaJ:keci Description:
24
D!RECT- VERNICE KUGLIN
509
510
(Exhibit Number 34 was JDaJ:ked. Description:

2 1999 26CFR 5601.602.)
Q.
Ms. Kuglin, yesterday, we tallced about a
else. Either yesterday afternoon or this morning, you

2 mentioned something about the Internal Revenue Code, and can
documen~
4 number 19, ifs a court case.
5 A.
(Exhibit Number 33 was markeci Description:
25 1998 26 CFR 5601.602.)
25 1040 Instructions 1992.)
D!RECT-~CEKUGLIN
(Is~)
Excuse me.
MR.BECRAFf: YourHonor,[baveitupbere.
7 May I approach?
3 you describe for us -- I'm loolcing at something on your-4 within reach of your left band, thafs lcind of either a blue
5 or purple cover, is that something that you bought?

6 A.
Yes, it is.
7 Q.
And wbat was it?

This is entided -- this is the July. 1994 edition of
THECOURT: Youmay.
8 A.
MR. BECRAFf: l stuck it in my stlck
9 the complete Internal Revenue Code.
I 0 Q.
Let me band you a document that bas a big 19 at the
10 Q.
II bottomofit.
And when did you - would you bave acquired that at
II least in the latter half of '94?
12 A.
Yes.
12 A.
Yes, sir.
13 Q.
Is that one of the documents or court cases we
13 Q.
Were there certain studies in which you engaged that
14 discussed yesterday afternoon?
14 related to the Internal Revenue Code?

There were, and on the documents that l bad commented
15 A.
Yes, it is.
15 A.
16 Q.
You read and replied upon it?
16 on earlier, two of the sections of the code which were
17 A.
Yes, I did.
17 specifically specified in those documents as sort of being a
18
MR. BECRAFf: Your Honor, I move for the
19 admission of that case.

20
21
THE COURT: It will be the next numbered
18 road map to the understanding of this issue on liability were

19 two of the sections, 6001 and 6011 of the code. So l wanted
20 to buy a code so I could actually look into it and begin to
21 11y to find out for myself whether there was validity to the
22 document, which is 35.
22 arguments that I bad been bearing.
23
23 Q.
Well, tell us wbat you did.
24 A.
Well, the 1040 form bas --let me get my 1040. l bad a
(Exhibit Number 35 was JDaJ:keci Description:
24 Cole v. McFarland Case.)

25 Q.
Now, Ms. Kuglin,let's move on to a little something
25 1040 form as everybody else does or generally every one else.

51!
Q.
5!2
Let me stop there. It sounds like you're reaching for
documen~
would that have a big 23 on it? Is that what
that area to find out what the Privacy Act was?
2 A
Yes, I did.
3 you're doing? Oh, okay. Go ahead.
3 Q.
Can you tell us what you did?
4 A
4 A.
Yes. I got the-- went to the law library and read-
2 a
This is just my prop here. And so in llying to fmd
5 out or answer my own questions, there's an insauction page on
5 excuse me, read the case on the Privacy Act. I found out that
6 the !040 form.
6 the whole purpose of the Privacy Act was because the
7 Q.
7 government or the agencies were sending out a lot of forms.
Can you identify that document that you have in your
think they dream up forms in their sleeps. and people were
band a little bit more completely?

9 A
Yes, I will. This is the !995 Form !040.
9 beginning to get confused as to whether or not the farms that
!0 Q.
lnsauction booklet?
l 0 were being sent aut were required to be returned, whether they
II A
lnsauction booklet, thaes correct.
II were necessary and believed that one OSHA regulation had
!2 Q.
What in there was of importance to you?
!2 almost 400 farms, and so people were going to their
!3 A.
The insauction page entitled the Privacy and Paperwork
!4 ReductionActNotice.
!3 Congressmen and saying, look, we need same kind of idea or get

!4 a handle on this river of paperwork that's coming out. So in
!5 Q.
Tell us about that.
!5 !974, the- Congress passed legislation that basically said
!6 A
Well, it says the Privacy Act of !974 and the Paperwork
!6 any agency of the government which was asking for information
!7 Reduction Act of I980 say that we -say that when we ask you
!7 or producing information gathering documents mu.<t comply with
I8 for information, we must first tell you our legal right to ask
!8 the requirements which I just read, what the authority is to
l 9 for the information and why we are asking for it and how it
!9 require the document, what the purpose is, what could be done
20 shall be used. We must also tell what could happen if we do
20 with it and whether or not it was voluntary or mandatory and
2! not receive it and whether or not your response is voluntary.
2I any repeteussions that could happen if the document was
Now. I - as I was interested in all the other issues,
22
22 mandatory.
23 I wanted to fmd out what this Privacy Act was all about, how
23 Q.
24 it came about and --
24 Privacy Act itself, what did you do in reference to the income
25 Q.
25 tax?
Let me stop you right there, did you do some study in
After you studied this matter that you thought was the
5!4
5!3
I A
Well, it says further down in the insauctions, the IRS
Privacy Act notice appearing in the !040 insauction booklet,
2 complies with the requirement of telling the authority. It
2 and once you obtained the Internal Revenue Code, can you lead
3 says our legal right to ask for the information is the
3 us through what you did when?
4 Internal Revenue Code's Section 600!, 60!!, and then later an,
4 A.
5 they added the 60 !2. So I thoug~ well, these are the
5 regulation which gave the IRS the authority to ask me to fill
6 regulations that require me to file the l 040 form. I think I
6 out the I 040 form, and what that section, in essence, says is
7 probably ought to read what those sections say.
7 that every person liable for any tax under this title shall
Q.
Is that one of the reasons why you obtained the
9 Internal Revenue Code?
Yes. I went to 600 l, because it said that that was the
8 keep such records, render such statements, make such returns

9 and comply with such rules and regulations as the secretary
!0 A
Yes, it is.
I 0 from time to time may prescribe. It then goes on to say that
II Q.
Well, tell us what you did after that.
II whenever the seeretary feels it necessary, he may upon- he
!2 A.
Well, after I got my Internal Revenue Code, I started
12 may require any person by notice upon such person to make such
!3 to get acquainted with it. I found out that there were-
13 returns, render such statements and keep such records as the
14 there was not just an income tax in the Internal Revenue Code,
14 secretary deems sufficient to determine whether or not such
!5 that this book itself covered over 85 different taxes, that
15 person is liable for any tax.
16 the code is divided out into different sections. You have the
16
l 7 income tax, you have estate tax, gift tax, employment laxes,
17 probably say something like every American who earns wages is
!8 excise laxes, alcohol, tobacco and fttearms and procedures.
!8 liable for the income tax or the individual income tax and,
Now, when I went to the section, I was expecting it to
19 And I found out, turning to the initial section. that the
19 therefore, must fill out the 1040 form. But that, as you can
20 section under income tax has about almost 1600 sections in
20 tell, is not what it said. It said every person, and as we
2! that part of the code. Now, there's almost, I believe, if I
21
22 go to the end here, there's over 9000 sections of this code.
22 corporation or aust, so it didn't give me really any idea as
23 Only about !600 actually apply to what the IRS defines as the
23 to whether or not I was one of the persons that this section
24 individual income tax.

25 Q.
Now, bearing in mind what you read a minute ago, the
discussed before, the term person could mean an individual or
24 talked about. Again, it says any person liable for any tax
25 under this title. Well, Ibis entire book is called the title.
~------1bt------

515
There are sections and subsections, but this is the title. So
516
l A.
Yes.
2 what that 6001 said, any person liable for any one of the 85
2 Q.
Can you identify what it was that directed your
3 taxes under here would be required to fill out the fmm.
3 attention to Section 600 l?
MR. MURPHY: Your Honor, could we approach?
4 A.
THECOURT: Youmay.
5 in the 1040 form.
6 Q.
The privacy notice itself?
7 A.
Right, the statement in the instructions l 040 booklet.
7 bench.)
MR. MURPHY: Judge, I'm going to interpose an

9 objection. She is just rambling on and on and on.
Yes, it was the 1040 form. the Privacy Act information
8 Q.
Okay.
9 A.
Yes.
Can I direct your attention to a document that you
I0
MR. BECRAFT: I will ask questions.
10 Q.
II
MR. MURPHY: It is supposed to be questions and
ll should have up there that has a big 23 on it? I would like to
12 answers.
13
12 identify it as being a 1975 document relating to your--
THE COURT: Objection sustained. The process
14 needs to proceed in accordance with 611.

15
13 A.
Right in front of me, yes.
14 Q.
Can you identifY number 23 for us, please?
15 A.
011. yes, lhis was after I had read the Privacy Act, I
16 had - actually, I had looked back at some other fmms. I had
16 court.)
Ms. Kuglin?
17 found that I had a !975 I 040 form. The Privacy Act was passed
18 A.
Yes.
18 in 1974. I had been audited in !975 and I had kept the
19 Q.
Let me ask a question and give us an answer, okay?
19 documentation for that. Inside of that fonn was also a
17 Q.
20 A.
All right.
20 Privacy Act notification, and lhis was the time that I had
21 Q.
Now -- you read the Internal Revenue Code, Section
21 initially read it when I was completing my 1040 fmm. At that
22 6001?
22 time in !975, it really did not make sense to me, and it just
23 A.
Yes.
23 began making sense or becoming important in my thought process
24 Q.
And had directed your attention to that section,
24 after I had read some of the articles and the questions of the
25 600 l and the 60 II had come up.
25 COITect?
518
517
Q.
sorry.
That document that you have in frnnt of you, it's your
2 excerpts of official government documents?
THE COURT: Let me get the -
3 A.
Yes.
MR. MURPHY: Your Honor, if they want to put a
4 Q.
What you kept in reference to the 1975 1040 instruction
4 photocopy in of the front and the back --
5 booklet?
MR. BECRAFT: Excise--
6 A.
That's correct.
THE COURT: This is a 1975 return. How is this
7 Q.
And thafs something you kept for your own personal
7 relevant?
MR. BECRAFT: Whafs relevant, Your Honor, is
8 business affaits, is that correct?
9 A.
9 this right here, this is a government document I think
10
That's correct.
MR. BECRAFT: Your Honor, I would move for the
II admission of the document that has a big 23 on it.
12
THE COURT: Without objection, it will be
13 received as 36.
!0 the government's objection is -- I didn't want to in

ll advance tear out those pages. I think those pages are
12 something that you can excise with ease.
MR. MURPHY: Yeah, just make a photocopy.
13
14
MR. MURPHY: Judge, if we could approach.
14
MR. BECRAFT: I have got photocopies.
15
THE COURT: All right. Let me lake a look at
15
THE COURT: You want me to lake this page out?
16 the document.
17
18 bench.)
19
MR. MURPHY: Judge, the only thing I object to,
20 the government language is fine, but her filling out the

21 tax return, I don't think that comes in.
22
MR. BECRAFT: I don't have any problem with
23 extracting it, Judge.
16 I'm not sure -- it just comes out.
MR. BECRAFT: I'm satisfied.
17
18
THE COURT: Okay.
19
20 court.)
21
THE COURT: The government portion of the form
22 is received as Exhibit 36.
23
24
MR. MURPHY: You need to turn your mic off.
24 1975 1040 Instructions.)
25
MR. BECRAFT: I thought I had it off. I'm
25 Q.
Ms. Kuglin, do you need that document? Do you need--

519
A.
2 Q.
520
A.
No, I don't.
All right. So after you compared the Privacy Act
Well, in the Privacy Act notice it had - it said -
2 had mentioned the word liable for the tax and that these were
3 notice that appeared in the 1975 1040 insttuction booklet,
3 the - 6001, 6011 were the regulations in which I could
4 what was your next step?
4 determine this.
5 A.
Q.
Well, the next step after I had read through the
Okay. Was it your understanding that being liable for
6 section on 600 l, I still did not have a clear definition of
6 a tax had some relationship to being required to file a
7 whether or not I was a person that fit under this liability
7 return?
8 requirement for the tax imposed. The next section that was
8 A.
Absolutely.
9 referred to in the Privacy Act notice was Section 6011. So I
9 Q.
Okay. What did you believe about someone who was not
10 turned to 6011, and it says general requirement of return
10 liable for a tax?
11 statements or less. It goes on to say when required by
11 A.
12 regulation prescribed by the secretuy, any person made liable
12 rules and regulations did not apply to them.
Well, if a person was not liable for the tax, then the
13 for any tax imposed by this title with respect-- or with
13 Q.
14 respect to the collection thereof shall make a return or
14 be in your view required to file a return?
A person that would not be liable for a tax, would he
15 statement acconling to the rules and regulations - excuse me,
15 A.
No, he would not be.
16 according to the forms and regulations provided -- prescribed
16 Q.
Did you make any effort to determine other sections of
17 by the secretuy.
17 the Internal Revenue Code and their relationship to the word
Well, now, this - the IITSI section has said that any
18
18 liable?
19 person liable, but it really didn't identify me as a person
19 A.
20 liable. The second section 6011 said any person made liable,
20 supposedly made me liable and that I could not find that it
I did. Since 600 1 and 6011 were the sections that
21 but again we have got the words person, and for any tax under
21 had, I had, in going through my code, as most reference
22 this title, but it didn't identify how I was made liable for
22 documents are, there is an index in the beginning of the book,
23 the tax.
23 and so I thought, well, if I look under the terms income or
24 Q.
What was so important in your mind about being liable
24 tax or liability, which was what I was looking for, that I

25 would find perhaps some indicators where I could see how -
25 for a tax?
522
521
examples of this liability. So I found under this section
This was not confusing like the 600 I and 60 II, it says the
2 of- let me get it, liability, I found liability for tax.
2 distiller or importer shall be liable. Since it referred me
3 And the first entry -
3 back to 5001, I went to Section 5001, it says imposition, rate
4 Q.
4 and attachment of tax, rate of tax, in general. There is
Let me stop you right there. When you say you found
5 something, a liability for tax, can you put it into context,
5 hereby imposed on all distilled spirits produced in or
6 what are you reading from?
6 imported into the United States a tax at the rate of $13.50 on
7 A.
rm reading from the index to the code.
7 each proof gallon and a proportionate tax at the like rate and
8 Q.
Okay.
9 A.
rm trying to find if there's a section in the code
9 clear to me, l knew exactly what they were talking about, who
I 0 that explains how a person is liable, how they're made liable,
10 they were talking about and what tax they were talking about.
on all frnctional parts of a gallon. Now, that again was very
11 since l didn't 1md it in the 6001, 6011 section.
11
12 Q.
When you turned to that index, what was your purpose?
12 in subtitle E of the tax code which is entitled Alcohol,
13 A.
My purpose was to find some words or some reference
14 to -- in regan! to liability, maybe I could find how a person
I also found it interesting that this Section 5001 is
13 Tobacco and Certain Excise Taxes, and as l went through the

14 section a little bit more, it talks about tobacco taxes and
15 was made liable and who was made liable.
15 other types, and it's basically the same format. The
16 Q.
Whatdidyoudo?
16 manufacturer, the wholesaler is made liable and- for the tax
17 A.
Well, after l found this liability for tax. the IITSI
17 imposed.
18 entry was alcohol taxes, and it said Section 5005 and 5041, so
18 Q.
19 I turned to Section 5005, and Section 5005 entitled Persons
19 other tax, what conclusions did you draw?
What conclusions-- by engaging in this study of some
20 Liable for Tax_ Well, this, you know, seemed like I was in
20 A.
Well, I drew the conclusion that when - in the
21 the right place, I was trying to find out if! was a person
21 arena - and I found this in the arena of the excise tax, that
22 liable for the tax. And it says in general, the distiller or
22 it was very easy for the IRS to specify exactly who's liable,
23 importer of distilled spirits shall be liable for the taxes
23 what tax they're liable for, what the amount of tax is and
24 imposed thereon by Section 5001. Well, this was very clear ID
24 there was no fussiness about it.
25 me, l thought, they know how ID tell a person who is liable.
25 Q.
Did you study anything beyond what you just mentioned,
DIRECT - VERN!CE KUGLIN
524
523
MR. BECRAFf: ril do it, Your Honor.
the alcohol tax0

2 A.
l did, because the alcohol tax is not in subtitle A
THE COURT: I didn't say anything earlier to
3 and, of course, the tax that the IRS says that the I 040 form
3 the witness or the jury, but irs time that l told them
4 is applicable to is -- excuse me-- is the individual income
4 that we are required to follow question and answer format.
5 tax, which is in Section I of subtitle A. So l decided to
MR. BECRAFf: I will do i~ Your Honor.
6 look through the index of the code, starting first with
THE COURT: Okay.
7 liability for tax, to see if there was any section that fell
8 under the fllSt, say, 1600 sections of the code, which are
8 court.)
9 applicable to individual income tax, and as rm going down

I 0 through the
lis~
l see aviation, fuel tax, banking,
THE COURT: Ladies and gentlemen, we are
10 required to follow a question and answer format, and
II employment taxes, highway motor occupational taxes, tobacco,
II typically narrative testimony is not allowed. That
12 all these other taxes, and l get all the way down here right
12 doesn't mean that the person can't answer a question with
13 underneath wines, it bas an enlry, withholding tax, and I
13 a full sentence or maybe a paragraph, but it does have to
14 thought, well, I know that my employer is withholding money
14 follow a fairly short answer- question and answer
15 out of my check, and right next to it I see Section 1461.
15 format. The reason for that is that under Rule 611 of the
16 1461 falls into the criteria of the sections of subtitle A-
16 Rules of Evidence, it's contemplated that we will use that
17
MR. MURPHY: Judge, can we approach?
17 format so that the opposing party can have an opportunity
18
TIIECOURT: Youmay.
18 to raise objections to improper questions or questions
19
21
19 that are not allowed by the rules and, frankly, so that

20 all of us can more readily follow the testimony. It's
20 bench.)
21 been found, typically, that the better format is a
22 rambling, narrative nature of this testimony, it's
22 question and answer format, so we have been discussing
23 improper.
23 that, and I thought by saying that and explaining a little
24
TIIE COURT: It's really -- we do have to follow
24 bit to the witness, because you wouldn't necessarily know

25 that, that it would be helpful to all of us. So we have
25 question and answer format.
526
525
to have a question followed by an answer that is
I A.
l looked --well, I checked to make sure that it was in
2 responsive to the question, and then the next question.
2 the first 1600 sections of the subtitle A, individual income
3 We're going to 1ry to do that.
3 tax.
THE COURT: Thank you.
TIIE WITNESS: l have been accused of the gift
4 Q.
A.
6 Q.
By chance, did you happen to turn to that section?

Yes, I did.
After you turned to that section in the Internal
7 Revenue Code, can you explain what you did 0
7 ofgab.
THE COURT: Well, we're going to hopefully
8 A.
I read the section.
9 Q.
And did you learn something from it?
10 briefer.
I 0 A.
Yes, I did. The section says every person required to
II
TIIE WITNESS: Okay.
II deduct and withhold any tax under this chapter is hereby made
THE COURT: A little briefer.
12 liable for such tax.
9 solve the question or problem by making it a little
12
13 Q.
Now, you were going through that index to the Internal
13 Q.
Now, did you do any - once you read that code section,
14 Revenue Code looking for some other section that referenced
14 did you kind of look- read anything else that related to it?
15 liability, a section that might fall within the range of the
15 A.
16 income tax sections of the code, is that correct?

17 A.
lba.t's correct
I - I drew a conclusion that the person that was
16 liable for the tax was a person- was somebody who was
17 required to hold and- deduct and withhold for that tax
18 Q.
Were you able to find such?
18 and-
19 A.
Yes, l did.
19 Q.
And did you make any effort to determine who that was?
20 Q.
Okay. After you found- tell us what you found.
20 A.
Yes, I went on, and further on in the section, it talks
21 A.
l found 14- Section 1461, it says liability for tax
21 about the -- excuse me.
22 withheld.
22 Q.
23 Q.
Now, you found that in the index?
23 just mentioned to determine who that party was that was
24 A.
Yes, I did.
24 liable?
25 Q.
Did you do something in response?
25 A.
Let me- did you study 1461, the code section that you
Yes, l did.
DlRECT- VERNICE KUGLIN

527
Q.
2 A.
528
of taxes?
Okay. And can you tell us what you learned?

Yes, I learned that this 1461 is in the code section,
2 A.
That's correct, in alcohol, tobacco, excises and the
3 which is entitled withholding on foreign taxpayers, and the
3 other sections of the code, yes, but in this particular code,
4 beginning of the section, I turned to the beginning of the
4 in the first 1600 sections of the code, which is individual,
5 section, which is chapter 3, because - and it says the
5 subtitle A, I found nothing else.
6 withholding tax on nonresident aliens and foreign
6 Q.
So what conclusions did you draw as a result?
7 cmporations, so this led me to understand thai Section 1461
7 A.
Well, the conclusion that seemed logical to me was, as
the tax code was saying, that the only person liable for the
8 was applicable to the withholding agents of nonresident aliens
9 individual income tax under subtitle A was the withholding
9 and foreign corporatioos.

10 Q.
Now, this was one section thai you had located inside
10 agent for foreign - rm sorry, for nonresident aliens and
11 the Internal Revenue Code that related to the income tax,
11 foreign corporations, and my income as a pilot did not fall
12 correct?
12 under that category.
13 A.
That's correct.
13 Q.
14 Q.
And it used the words in the statute itself liable,
14 A.
No, I didn't, rm an American citizen.
15 correct?
15 Q.
Did you consider yourself a foreign corporation?
16 A.
That's correct.
16 A.
No, I didn't.
17 Q.
What, if any, effort did you make to determine whether
17 Q.
Were you making payments of income to nonresident
18 or not there were any other similar sections inside the
Did you consider yourself a nonresident alien?
18 aliens or foreign corporations?
19 Internal Revenue Code in reference to the income tax?
19 A.
No, I was not.
20 A.
I--
20 Q.
AU right With thai in mind, did you believe or have
21 Q.
Were there any others that you found?
21 any belief as to whether you were required to file a federal
22 A.
Yes, there were others that I found. There were - as
22 income tax return?
23 far as a person made liable and liable for the tax, this
23 A.
24 Section 1461 was the only sectim under subtitle A.
24 saying that 6001 and 60 11 were the regulations that required
25 Q.
25 me to complete the form. that I was not a person required to
Okay. So you found others in reference to other types
Well, this indicated to me based on the Privacy Act
DlRECT-VERNICEKUGLIN
529
530
file that form based on 1461.

2 Q.
Now, let me direct your attention to-- there should be
what that was and what it required?

2 A.
Again, went down to :fmd the law, and read it and
3 a document in front of you that has a big 24 on it.
3 got - made myself familiar with what the requirements of the
4 A.
Yes.
4 Paper Reduction Act was.
5 Q.
Do you have it in front of you?
5 Q.
Tell us what you learned as a consequence.
6 A.
Ido.
6 A.
I learned that similar to the Privacy Act, Congress and
7 Q.
Olcay. Is that a document that you obtained somewhere
7 agencies had been producing a lot of paperwork, a lot of forms
8 in this time fuune between '93 and maybe late'95?
8 and people were getting confused as to which forms that were
Yes. it is.
9 required. So by 1980 - I believe it was 1980, the -
10 Q.
Is that something that you read?
10 Congress passed the Paperwork Reduction Act. What this act
11 A.
I did.
11 said was that every agency - I need to back up about the law
12 Q.
Okay. Tell us what you gathered by reading that
9 A.
13 particular document?
14 A.
Well, by reading the document, it starts out with 26
12 a little bi~ if! might

13 Q.
Okay. What is it about the law that was important to
14 you?
The way the laws are promulgated, the - Congress
15 CFR 1.1-1, tax on individuals, and the discussion in the form
15 A.
16 is about something known as an OMB number and a cross
16 passes a law, the law is then given to the agency which is
17 reference.
18 Q.
Okay. Did you engage in or make any effort- you
19 mentioned this term OMB, what that might mean?

20 A.
Yes, I did. I did some research and found out that the
17 responsible for developing the regulations to fit thai law,

18 and those regulations have to be published in what is called
19 the Federal Registry, which is the citizens newspaper advising
20 us of what the government is anticipating to do with us, and
21 OMB numbers were numbers required on the forms and that the
21 once those -- the public has the ability to comment --
22 Congressional Act, the Paperwod< Reduction Act was the
22
MR_ MURPHY:
23 legislation which required these numbers to be put on forms.
23
THECOURT: Youmay.
24 Q.
24
You mentioned congressional legislation, the Paperwod<
25 Reduction Act. What, if any, effort did you make to determine
25 bench.)
Judge, could we approach?

532
531
:MR. MURPHY: Judge, rm getting a little

2 concerned that we're going beyond lalking about her
beliefs into what !he law is, and I don't believe that's a
4 correct statement of the law.
lawyer attempts to tell you what lhe law is, you should
2 not accept !he law from !hem. It's my job to give you lhe
3 accurate statement of the Jaw, and you should not be in
4 any way confused about a statement that a lawyer or a
:MR. BECRAFT: I anticipated that in advance,
5 witness might make about the law.
6 and I told the jury yesterday, correct me ifrm wrong,
TiiE WITNESS: Right.
7 but I think I brought !hat issue up when we were going
TiiE COURT: I know in this case we're going
8 through voir dire, but I know that I did it in my opening
8 into an inqujry as to what Ms. Kuglin's beliefs were, and
9 statement. and I know that I --
9 you're going to have to make some decisions about whether
THE COURT: I think Mr. Murphy is right, we're
10
10 or not they are good faith and there will be various
11 sort of trying to tell what the Jaw is. I will just
11 criteria that you can use in making that determination.
12 remind the jury that at the end of the case, I will give
12 So a defendant is allowed to state what she believes the
13 the instructions as to the law, and whatever the witness
13 law was, obviously, and why she believed that. but her
14 or the lawyers say about the law is not the controlling
14 statc:ment about what the law is not to be considered by
15 law in the case, that the law is what the court gives them
15 you as in any way refleeting what the law, in fact, is. I
16 as the law, and that may help us.
16 will give you those statements. We may need to remind you
She can -- you can aslc her what she believed
17
17 of that a couple oftimes during the trial.
18 the law to be and why did she believe it. and the jury is
18
TiiE WITNESS: I apologize.
19 going to have to decide the ultimate question, but Mr.
19
TiiE COURT: Actually, we're going to take a
20 Murphy is correct on this.
20 short break and discuss what we talked about a little bit,
21
MR. BECRAFT: 1bank you, Your Honor.
21 it might make us a little more efficient in the
22
22 presentation, and it's not inappropriate to make sure !hat
23 we know exactly how we're going to proceed. We're going
23 court.)
24
THE COURT: Ladies and gentlemen, irs a point
25 that we need to always keep in mind that if a witness or a
24 to take a 15-minute morning break. We didn't get a break

25 earlier. We actually started pretty early in here, and

533
534
rm going to see some lawyers who have been waiting to see

2 me on a matter that was just brought to my attention just
about 30 minutes ago, and they have been waiting that

4 whole period of time, so we will take our morning break a
little early. Remember, today is a day where we take a
Gentlemen, ladies, you may proceed.

2
3 Q.
:MR. BECRAFT: May it please the court.

Ms. Kuglin, let me give you a direction here, can you
4 pull out the documents that have a big 26 and big 27 and big
5 28 and big 29 on them? Do you have those in front of you?
6 lunch break from about 12:30 to 2:00, and I think we're
6 A.
I have them in front of me.
7 going to finish all the proof probably today, it's hard to
7 Q.
The one that has the numbers -- well, how about also
be sure, but I think we will. Don't discuss the case
8 25, do you have !hat in front of you?
9 among yourselves. Don't let anybody talk with you. We
9 A
Idonow.
I 0 will see you in 15 minutes.
10 Q.
Olcay. Now, can you describe the one that has the
11
(Jury out at 10:25 a.m.)
II number 25 on it for me, please?
12
THE COURT: We will let y'all take your break
12 A.
Yes, this is entitled the Internal Revenue Cumulative
13 so everybody gets a restroom break.
13 Bulletin 1985-1 January through June.
14
(The court took up another matter.)
14 Q.
15
(Recess taken at 10:30 untill0:45 a.m.)
15 not that is a document !hat you read and relied upon at some
16
THE COURT: Bring the jury in.
16 stage before, say, April the 15th of 1996?
17
(Jury in at 10:46 a.m.)
17 A.
Yes, it is.
18
THE COURT: You can be seated. I think you can
18 Q.
Olcay. How was your attention directed to that
Do you have a recollection or judgment as to whether or
19 all tell, I'm still trying to deal with inSUlllllCe agents
19 document?
20 during the break. It doesn't go any better for me than
20 A.
21 you guys. rm sorry it has taken a little bit more time,
21 Paper Reduction Act.
My attention was directed to this document through the
22 but rm trying to deal with some problems that I need to
22 Q.
23 get taken care of too. Sorry. I found out alo if!
23 description a. to your understanding and belief about what the
24 tried to deal with them after 5:00 o'clock or before 8:30,
24 Paperworlc Reduction Act was?
25 it doesn't work either.
25 A.
Did you have an understanding -- give us a brief
My brief understanding about the Paperwork Reduction
536
535
Q.
Act was that it was a legislative action by Congress in order
Now, do you have- I think I noticed earlier in the
2 to get a h:mdle on the number and amount of infonnation
2 day that you had a '95 1040 instruction booklet there with
3 gathering forms that the agencies and the government were
3 you?
4 promulgating.
4 A
Yes,Ido.
5 Q.
Can I ask this simple question? Did you make an
5 Q.
Okay. And did you have any understanding as to whether
6 or not there was some type of a requirement imposed on
6 inquiry back when you were studying this Paperwork Reduction
7 government agencies in reference to this paperwork and OMB
7 Act as to what OMB control number appeared on the Form 1040?
8 numbers?
9 A
My understanding is that when - before a regulation
8 A.
Yes, I did.
9 Q.
Okay. Do you have that in front of you?
10 could be enforced, before an information gathering document
10 A.
Yes, I do.
11 could be authorized. both the regulation and the document had
11 Q.
Do you have a Form 1040 in front of you?
12 to be submitted to the office of management and budget for
12 A.
Yes, I do.
13 approval.
13 Q.
Did you make such an examination back whenever you were
14 Q.
14 doing this in '93, '94, '95 as to what OMB control number
And what was your understanding about how something was
15 approved by office management and budget?
15 appeared on the Form 1040?
16 A.
16 A
Yes, I did.
17 approved was that the office of management and budget,
17 Q.
What did you learn?
18 otherwise known as the OMB for short would read the
18 A
I learned that the OMB number on the Form 1040 is OMB
19 regulation, determine that it was a valid regulation, they
19 number 1545-0074.
20 would then review the information gathering form which was
20 Q.
21 at1aebed to that regulation or form, and once they had
21 has a big 25 on it
My understanding about bow these documents were
Q.o~
Now, let me direct your attention to the exhibit that
22 determined that both the regulation and the form were
22 A.
I have got that.
23 appropriate that they would affix an OMB number to that form,
23 Q.
Okay. Tell us what you did once you obtained that
24 and that the OMB number on that form could only - that form
24 document, Exhibit Number 24 or big 25?
25 could not be cross referenced to another regulation.
25 A
I knew through the Paperwork Reduction Act that every
538
537
Make sure I have got them all. I don't think so. I have
agency was required to publish a cross reference or an index,

2 cross referencing the regulations with the approved
2 got 26 and I have got 27.
3 information gathering forms.
THE WITNESS: Oh, I'm sorry, 25 is the one I
Now, briefly identify 26 and 27 for us, please.
4 have.
5 A.
26 and 27 is entitled 1993 instructions for form 2555.
6 Q.
And 27 is?
6 looking for. All right. There we go.
7 A.
27 is form 2555.
MR. BECRAFT: 26 will have 38, Your Honor.
8 Q.
All right. Are these documents that you read and
THE COURT: I have got it now. Thanks so much.
4 Q.
9 relied upon, say, sometime prior to April 15th of'%?

10 A.
11
Yes, they are.
MR BECRAFT: Your Honor, could I move for the
12 admission of those next three?
THE COURT: Yes, ma'am, that's what we're
9 And I will band it back in just a second, let me make a

10 notation.
11
12 IRS Bulletin.)
13
MR MURPHY: No objection.
13
14
THE COURT: Yes. They're received as 37,38
14 1993 Form2555 Instructions.)
15 and 39.
16
THE COURT: Can I ask you a simple question?
15
(Exhibit Number 3 8 was marked. Description:
16 1993 Form 2555.)
17 Wait just one second. We keep a running list, ladies and
17
18 gentlemen, and if the deputy is not here, I mainlain a
18
THECOURT: Youmayproceed.
19 duplicate list, that's why we have to do that, and
19
MR BECRAFT: Thank you, Your Honor.
20 sometimes folks don't know that I have to do that.

21
MR BECRAFT: Your Honor, I wrote down a note,
22 the one that says 25, put 37 on it.
20
21 Q.

Now, Ms. Kuglin, you have in front of you Exhibits 37,
22 38 and 39, correct?
23
THE COURT: Ob, okay. Let me see 25.
23
24
THE WITNESS: Did I not pass them to you?
24 Q.
Can we proceed without that?
25
THE COURT: No, ma'am, thafs why I do that
25 A
Yes, we can.
THE COURT: I have still got 38 and 39.
540
539
MR. BECRAFr: If the court doesn't mind.
lHE COURT: No, that's tme.
3 Q.
These three docwnents you acquired before April the
4 15th of 1996, and you looked at them and studied them, what
was it that you concluded by your examination of them?
6 A.
I looked a1 the cross reference. the c1m1ulative
7 bulletin, and it lists the 26 CFR part of the section and then
the current OMB n1m1ber for the form applicable to that. and
-~
9 the trrst entry on that index is l.l-1, which I was familiar
Q.
So you picked up both the form itself as well as the
2 instructions
3 A.
Right. It may have been the Post Office.
4 Q.
Okay.
5 A.
But I acquired the Form 2555.
6 Q.
So tell us what that meant to you in reference to some
7 obligation on your part to Form I 040?

8 A.
Well, since this was a document that was required by
9 the Paperworli: Reduction Act for the agencies to give us an
10 with, was the individual income tax. and I looked to the
10 idea of what fo11llS are approved for specific regulations, that
II right. and the form - the number -- the OMB control number
II listed here the only form that is listed for 1.1-1, individual
12 for the form applicable to that is 1545-0067.
12 income tax, is the 0067 f!X111, that that was the form that I
13 Q.
Naw, did you have some mental operation at the lime as
13 would be responsible for completing.

Let me- can you pull out from the exhibits the
14 to whether or notlhal was the form that related to the Form
14 Q.
15 1040?
15 document that has a big 28 on it?
16 A.
Well, the Form l040has an O:MB number of 1545-0074.
16 A.
I have that document.
17 Q.
And this one had a different n1m1ber?
17 Q.
All right. Somewhere around the lime frame in which
18 A.
Yes,itdoes. Thelastfournumbersare0067.
18 you were examining or studying the prior three exhibits. did
19 Q.
Okay. Did you make any effort to delemline what form
19 you obtain that docwnent?
20 it was that that related to?
20 A.
Yes. I did.
21 A.
21 Q.
Okay. Can you tell us what it is?
22 whether or not or how I could find out what form that was. I
22 A.
It's entitled TD, which is my understanding treasury
23 may have called the IRS, as far as how to find out the form
23 decision. Treasury decision under Internal Revenue laws of
24 number, and then they told me that it was Form 2555, and I
24 the United States, volume 18, January to December, 1916.
25 went down to the IRS office and picked one up.
25 Q.
Yes, I did. I went down to the IRS, and I asked them
And is the document that you have in front of you
542
541
Treasury Decision 2313?
I would sometimes go just to read through and get familiar
2 A.
Yes, it is.
2 with some of the older tax laws and such like that.
3 Q.
Let me kind of back up, and I want to ask a broad
3 Q.
question about what you have done to lOCale documents and
4 A.
The University ofMemphis has a very good law library.
cases. Before you made these studies of the tax laws, had you
6 ever even gone to a law library before?

7 A.
Not before I started my study, no, I had never walked
8 intoone.
All right. What law library did you visit?
5 Q.
There on Central?
6 A.
Yes, sir.
7 Q.
Have you also attended meetings where you have gathered
8 some of these same type of documents that was available?

9 A.
Yes, I did
10 before '92?
10 Q.
And did you obtain documenrs from the Internal Revenue
II A.
No, I had not.
11 Service itself?
12 Q.
Since then, between 1992, the lime that you heard Andre
12 A.
9 Q.
Had you ever even really studied any law whatsoever
13 Maru (spelled phonetically) on TV and, say, like all the way
I obtained like a 2555 from either the Internal Revenue
13 Service or the Post Office, somebody who had the forms
14 up through April 15th ofl996, you started studying the law,
14 available.
15 what you perceived and understood to be the law -
15 Q.
16
1HE COURT: We have an equipment failure, wait
17 just a second.
18
1HE REPORTER: Could you repeal the last
Now, by the time that you're looking alibis Form 2555,
16 you had done what you just described, visited the library,
17 read a whole lot of material, obtained it from various
18 sources, including the government and the IRS and the law
19 question?
19 library, correct?
20 Q.
Had you gone to a law library before '92?
20 A.
That's correct.
21 A.
No, I had not.
21 Q.
You had certain beliefs at that stage as to whether or
22 Q.
Did you go to the law library after '92?
22 not you were required to file an income tax return, is that
23 A.
Yes, I did
23 correct?
24 Q.
Haw frequently?
24 A.
25 A.
I went each lime I needed to find a copy of a case, and
25 whether or not the 1040 was the appropriate form.
That was correct. I was beginning to really question

543
Q.
All right. And once you made this comparison, you had
544
1 A.
Yes, l did.
And it related to your formation of your beliefS about
2 Exhibit Number 37 in your band which listed some OMB control
2 Q.
3 numbers and you bad Exhibit Number 26 and 27 in your band.
3 whether or not you were required to file an income tax return?
4 what cone! usions did you draw1
4 A.
5 A.
That's correct.
Well. l drawed -- l drew the conclusion, after seeing
MR. BECRAFT: Your Honor, l move for the
6 Form 2555 which had the OMB control number 0067, which the
6 admission of the document lhat has the big 28 on it.
7 cross reference said was lhe appropriate information gathering
form for the individual income tax. 2555, and the heading of
9 lhat form is -- excuse me - the title on lhat form is foreign
10 earned income.
10 1916 Treasury Decision.)
11 Q.
Now, looking at the one lhat has Exhibit Number 28 on
12 it.
13 A.
You'll have to tell me which form, since they have
11 Q.
Tell what it was you learned by reading that?
12 A.
Well. this was in regard to the taxation of nonresident
13 aliens and foreign corporations.
14 changed lhe --
14 Q.
Do you need the document back?
15 Q.
No, this one-
15 A.
That would probably be helpfuL
16 A.
-- the numbers.
16 Q.
Look at that document and give us the refmed essence
17 Q.
This one should only have 28 on it.
17 of what you learned from it?
18 A.
l have got lhat. Treasury Decision 2313.
18 A.
19 Q.
Right. Now. were you obtaining documents like that
19 which it says that they hereby held that the income accruing
20 from a wide variety of sources1
Well, initially, it l:llks about the Brushaber case in
20 to nonresident aliens in lhe form of interest and from bonds
21 A.
Yes.
21 and dividends of the stock of domestic corporations is subject
22 Q.
Did you obtain that before-- sometime before April
22 to the income tax imposed by the Act of October 13, 1913. In
23 15th of 1996?
23 other wonls, lhe 16th Amendment.
Is there anything in lhere that relates to the filing
24 A.
Yes, I did.
24 Q.
25 Q.
Okay. Is that something you read and relied upon?
25 ofForm 10401

545
l A.
Let me read on. There is one mention of a form. and it
2 says lhat- it's at the end of quite a long paragraph, so I

will just summarize the paragraph. it talks about nonresident
4 aliens and such. and it says that sum will be sufficient to
5 pay the normal tax of one percent imposed by law and shall be
546
I 040, and I missed lhat as I was reading it.
2 Q.
Okay.
3 A.
My other form was highlighted.
4 Q.
Let me ask you this question: What was going through
your mind at thi' sl:lge about whether or not you were required
6 made on an annual return of l 042. There is another form, form
6 to file a Form 10401
7 l 008 for deductions applicable to nonresident aliens and other
7 A.
8 agents and represenl:ltives.
8 were government documents and the cross reference, which is
9 Q.
Did you reach any conclusion as to whether or not what
l 0 they were talking about in lhat treasury decision had any

11 application to you?
12 A.
I did not. There's another mention of a form on the
Well, the documents that I had in front of me, which
9 required by every agency to be completed. indicated to me lhat

10 lhe only form that had been approved by lhe office of
11 management and budget for the individual income tax was the
12 foun 1545-0067, entitled foreign earned income. It confirmed
13 third page.
13 forme what I had found in the tax code under 1461. The only
14 Q.
Let me direct your attention --
14 section under subtitle A. individual income tax, which makes
15 A.
Yes.
15 any person liable for lhe tax on subtitle A, which is
16 Q.
There's a page that has 53 at the top.
16 nonresident alien -- I'm SOtry, the withholding agent for
17 A.
Yes.
17 nonresident aliens and foreign corporations, and I realized
18 Q.
Okay. And then using lhat page at lhe very bottom
18 that I did not fit in eilher one of those categories and.
19 going over to page 54.
19 therefore, that Form 2555 was not applicable to me.

Now,Jet me- you did some olher studies, and Jet me
20 A.
Yes.
20 Q.
21 Q.
Is that a section that you read and relied upon?
21 direct your attention to ExlnbitNurnber41, if I may. Big
22 A.
Yes. The responsible heads. agents or representatives
22 thick one.
23 of nonresident aliens who are in cbarge of the property owned
23 A.
Yes.
24 or business carried on within the United States shall make
24 Q.
Is that something lhat you read, studied and relied
25 full and complete return oflhe income tax form on the Form
25 upon1
DIRECT- VERNICE KUGLlN

547
A.
2 Q.
548
Absolutely. That was a long read.

Okay. Just tell us what you learned by reading that
jurisdiction over some of that land.

2 Q.
Now, was this-- is this an official government
3 document.
3 document to your understanding?
4 A.
4 A.
To my understanding, it is.
5 Q.
Did what you read- what you read in that work, did it
This document is entitled Jurisdiction Over Federal
5 Areas Within the United States, a report of the

6 interdepartmental committee for the study of jurisdiction over
6 have an impact on your beliefS regarding your requirement to
7 federal areas within the states. This was submitted to the
7 file Form 1040?
8 attorney general and transmitted to the president on June of
8 A.
Yes. it did because- yes, it did.
9 1957. President Eisenhower was interested in finding out what
9 Q.
Okay. What was it'?

Well, it said to me that because the federal government
l 0 the jurisdictional limitations of the federal government was,
10 A.
11 and he asked the state's attorney general to compile a
ll had not acquired jurisdiction over where I lived, the area
12 document.
12 that I lived or over the place that I worked, employment, that
13 Q.
Can you give us the refined essence of what it was that
14 you learned by reading that document?

15 A.
13 this was not subject-- that I was not subject-- a person

14 subject to that jurisdiction in regards to the income tax, and
Yes, I found out that federal jurisdiction extended
15 with all of the other -- substantiated the other court cases
16 into the state territories in one of three ways they could
16 and things that I had read. Also, I looked in the index to
17 have acquired that. One of the ways was that land within the
17 find out what the jurisdiction of the federal government in
18 states could he sold to the federal government and, therefore,
18 the realm of income tax was, and the only thing I could find
I 9 they would acquire jurisdiction over that, that land could be
19 in the index was in reference to the state's ability to tax
20 ceded by the legislature under certain prescribed methods to
20 people that were on federnlland. There was no reference
21 the federal government for its military grounds, other
21 whatsoever of the ability of the federal government to
22 facilities, and that federal jurisdiction applied to those
22 directly tax property that I owned.
23 areas. And dlat the third way that the government could
23 Q.
24 receive federal jurisdiction within the states was when a
24
25 territory became a state, the government could retain
25
TIIECOURT: Youmay.
Now-
DIRECT-V~CEKUGLIN
DIRECT- VERNICE KUGLlN

549
550
TIIE COURT: We have to let Mrs. Parker have a
2 bench.)
3
2 chance to replug her equipment in.
MR. MURPHY: Judge, rm going to object. We're
4 getting back into the long narrative.
MR. BECRAFT: If I can tell the court, I'm
MR. BECRAFT: May I approach the witness with a
4 couple of exhibits, Your Honor?
TIIE COURT: You may.
6 through offering exhibits. I am at the stage now where
6 Q.
Ms. Kuglin, there has been offered into evidence, I
7 we're getting ready to go into the long stretch, what she
7 don't know the exhibit number for it, but the '92 return. is
8 did with the IRS, letters you wrote, those Don Roberts'
8 that correct?
9 letter and we're wrnpping up.
9 A.
That is correct.
l 0 Q.
And that was prepared by an accountant, is that
10
MR. MURPHY: rm going to object to any mention
11 of the Roberts' letters at all.
mE COURT: There's no indication that there
11 correct?
12 A.
That's correct.
13 were no opinions which she relied, so they're just
13 Q.
Mr. Napp?
14 hear.;ay.
12
14 A.
Yes, sir.
MR. BECRAFT: Okay. Just to tell the court
15 Q.
Did you file a '93 return?
16 where I'm headed, we have concluded all her beliefS.
16 A.
No. I did not.
mE COURT: Are we going to finish before
17 Q.
And at the time that you - where were you living then,
MR. BECRAFT: I'm hoping maybe 15 minutes for
19 A.
15
17
18 lunch?
19
18 in '93?
20 me and then it depends on Mr. Murphy.
I was living where I am now, 200 Wagner Place.
20 Q.
Shelby County. Tennessee?
21
mE COURT: All right.
21 A.
Yes, sir.
22
22 Q.
Downtown Memphis?
23 A.
Yes.
24 Q.
And where did you w<rl:?
25 A.
I worlced at Federal Express.
23 court.)
24
MR. BECRAFT: Before I proceed. can I get an
25 exhibit?

551
Q.
552
Out at the aiiport?
Q.
You don't have any contentions, whatever those
2 A.
That's correct
2 figures-
3 Q.
Also in Shelby Counly?
3 A.
Yeah.
4 A.
Yes.
4 Q.
- they're correct'?
5 Q.
And I think we got evidence here that-- you were
5 A.
That's correct
6 eith01" sent checks from or th01"e was an account that you had
6 Q.
7 at the Credit Union where FedExjustdeposited your paycheck
7 A.
No, I did not.
into the account?
8 Q.
9 A.
Yes.
9 A.
No, I did not.
10 Q.
Did that happen from '92, '93, forward?
10 Q.
Were you subjected to withholding in '95?
1 1 A.
I believe that that is the case. I'm not quite sure
II A.
Yes, I was.
12 when I set up automatic deductions. I was flying
12 Q.
So what did you do ultimately regarding this problem of
13 international at that time, and it was convenient.
13 withholding from yoW" pay?
14 Q.
Now, there's a '90 Form W-4 that's submitted into
15 evidence, and do you recall that it says, you know, you're
14 A.
Ultimately, by December 30th of 1995, I come to the
15 conclusion that there was - I had found significant enough
16 taking your normal exemptions?
16 information to really question the fact that I was required to
I 7 A.
Correct.
17 file the Form 1040, the question that whether or not it was an
18 Q.
Now, we don't have anything here for '93, '94, but were
18 appropriate document and a required document.
19 you subjected to withholding in '93 and '94?
19 Q.
20 A.
Yes.
20 take a look at those exhibits in front of you and pull out 47,
21 Q.
And do you have a judgment or recollection as to
21 the one that has 47 on it and the one that bas 48?
Okay. Now, let me direet your attention to-- can you
22 approximately what the rate of withholding was for you during
22 A.
23 '93 and '94?
23 Q.
I believe so.
24 A.
The ones that you just gave me?
25 Q.
No, not the ones that !just gave lo you. In the stack
24 A.
I'm not sure of the total amounts, I believe it was
25 specified yesterday it was about in the 30 or $40,000 ranges.
Can you tell me the name of-- in this pile?

553
554
that you had when you began your testimony this morning.
2 A.
All right.
2 court.)
3 Q.
I believe they're yoW" letters bearing yoW" signature
3 Q.
4 in October of'95 and November of'95. Do you have them?
5 A.
I have these letters.
5 reference to yourself, but in reference to someone else, in
Before we get into the substance of that, did you have
6 reference - with some IRS agents in the summer of '95?
7 any conver.;ations with anybody at the IRS sometime in 1995
7 A.
That's correct. yes, I did.
8 that related 1o your investigations of the tax laws?
8 Q.
Let's not get into the substance of that, okay. Now,
9 A.
9 what was your -- what was going through your mind at that
Yes, I did. I bad an acquaintance --
10
MR MURPHY: Judge, can we approach?
10 stage after that meeting?
11
THECOURT: Youmay.
II A.
12
12 on the meeting was that contrary to the information on the
14
MR MURPHY: Judge, I don't know that her
15 conversations with the IRS are relevant. It's hearsay.

16
MR BECRAFT: I was merely pinpointing a time.
I had -- the thing that was going through my mind based
13 documents which said that I could go to the IRS and ask the
14 questions that I had in regard to my liability under the
15 individual income tax -16
17
18 to relating what they said, Your Honor, and mention that
18
(fhe following proceedings were bad in open
19 she bad a meeting in July, that she reached certain
19 court.)
17 I'm not going to - I'm going to expressly disinvite her
Just to make a point-- just to make a point, did you
4 have some type of actual sit down face-to-face meeting, not in
6 Q.
13 bench.)
20 conclusions. They have an effect upon the other reasons
20
21 why she wrote those letters in October and November.
21 relevance. What does this have to do with her belief?
22 Although we do have a date of the meeting with the IRS,
22
23 not that I'm going to offer it, YoW" Honor. I just
23 I'm getting ready to offer those two letters, Ocrober and
24 mention that in passing.
24 November of '95 that she wrote to the Internal Revenue
25
25 Service, YoW" Honor.
THECOURT: Okay.
MR. MURPHY: Judge, I'm going to object to
MR. BECRAFT: Her intent and belief led her--
DlRECT - VERNICE KUGLIN
555
556
TIIE COURT: Do you bave any objection?
MR. MURPHY: I don't bave any objection to the
3 letters, Judge.
2 A.
r11 move to
5 the-
The other one was addressed to the Internal Revenue
4 collection branch.
5 Q.
TilE COURT: Move to the letters. Good.
What with the other one?
3 Service in Memphis, attention of James Gaither, chief
MR. BECRAFT: I will speed it up,
Q.
All right. Did you sign those letters and mail them to
6 the IRS?
MR. BECRAFT: Thank you.
7 A.
Yes, I did, and I have certified copies of the receipt.
8 Q.
So you sent them certified to the IRS?
9 A.
Yes, I did.
9 court.)
I 0 Q.
Ms. Kuglin, let me direct your attention, let's just go
MR. BECRAFT: Your Honor. I move for the
10
11 to the heart of the matter, to the letter that, I believe you
11 admis.ion of the documenls that bave 47 and 48 on it.
12 wrote in October of'95. It bas a big 47 on it
12
13 A.
I have got that letter.
13 on, I believe it's 48 that fm taking the position that

14 aren't admissible.
MR. MURPHY: Judge, there's some attachmenls
14 Q.
Okay. Now, does it have a date on it?
15 A.
Yes, it dnes. It is October the 18th, 1995.
15
16 Q.
All right. And take a look at the next one.
16 will go over them at side bar.
TIIE COURT: Let me take a look at them and we
17 A.
Tbat one is dated November 25th of !995.
17
18 Q.
All right. Are those letters that you composed?
18 bench.)
19 A.
Yes, they are.
19
20 Q.
All right. Do they relate to your lax liens or lax
20 an attachment, I don't know if it is from the IRS, it says
MR. MURPHY: Judge, I believe it's 48, there's
21 positions?
21 someone is not liable to file a lax relllm. The names are
22 A.
They relate to the questions that I wanted to ask, yes.
22 blacked out Judge, I don't think that ought to come in.
23 Q.
Okay. And to whom are they addressed?
23 There's two of them.
24 A.
They were addressed - the October the 18th letter was
24
TIIE COURT: Lets make sure we're--
25
MR. BECRAFT: Of course -- yeah, those are it.
25 addressed to the Internal Revenue Service, Memphis, Tennessee.

557
558
THE COURT: These are letters which are from --
November 25th, !995 letter with certain attachmenls, and
2 of an individual in Delano, California, that the name is
2 its addressed to Internal Revenue Service to Mr. Gaither
3 blacked out, the laxpayer's name is blacked out, and the
3 from Ms. Kuglin.
4 taxpayer in Ogden, Utah, and the name is also blacked out
on that, so these are hearsay documenls, and they're

6 not--
(Exhibit Number 41 was madced. Description:
5 October 18, 1995 Letter.)

6
MR. BECRAFT: I would redact them, Your Honor.
7 November 25, 1995 Letter.)
TIIE COURT: Subject to any--
8 Q.
MR. MURPHY: Judge, I don't have a problem with
9 time, what did you believe about the necessity on your part to
Ms. Kuglin, what was going through your mind at that
I 0 the exhibit.
10 file Forms 1040?
II
MR. BECRAFT: Can I tear them?
II A.
12
THE COURT: Lets see if we can't find a staple
12 government documenls that I relied upon, the I 040 was not the
13 remover.
14
MR. BECRAFT: I will pull those apart without
15 those pages.
At that time, based on my research, based on the
13 form that I had- excuse me,let me start this again. I come

14 to the conclusion or the belief that there was no regulation
15 in the Internal Revenue Code that made me liable for the
16
THE COURT: Sure.
16 individual income tax and that the 1040 fonn. there was no law
17
MR. BECRAFT: And I see a stapler right there.
17 that required me to file that form for that particular tax.
18 I will pull out those two appending documents, and now we
18 Q.
19 can staple it back.
19 questions in the letter'?
Looking at Exhibit Number41, did you pose certain
20
THE COURT: Okay. All right, gentlemen.
20 A.
This is the new 41 we're talking about?
21
21 Q.
Yes. It will have a yellow sticker on it that says 41
THE COURT: We will made Exhibit 41 and Exhibit
23 A.
And would you repeat your question?
24 42. 41 is an October 18, 1995letter to the Internal
24 Q.
Did you pose by means of that letter certain questions?
25 Revenue Service from Ms. Kuglin, and Exhibit42 is a
25 A.
Yes, I did.
22 court.)
23
22 now.

559
Q.
560
Wbat were the questions that you posed to the Internal
THE COURT: Yes, you may.

2 Q.
Can you hand me the next exhibit, November?
The initial question was in regard to the OMB cross
3 A.
Yes.
4 reference number and the fact that the 1040 form bad the
4 Q.
Now, I have on the Elmo here your letter dated November
5 1545-0074 number on it, and the cumulative bulletin index
5 the 25th of 1995.
6 showed that the only form that bad been approved for the
6 A.
Yes.
7 individual income tax was the 2555 f01m, foreign earned
7 Q.
Sent to the Internal Revenue Service. Was there
2 Revenue Service?
3 A.
something that prompted this?
income. I listed a court case that said for federal tax
I did not get a response for my first letter, and I bad
9 purposes, federal regulations govern, and I discussed my
9 A.
l 0 understmding of the requirement of the statutes and
10 received a CP 515, 516,517 and 518 letters which were
ll implementing regulations in regard to determining liability
ll requests for a l 040 form to be filed.
12 for any individual in regard to the taxes.
12 Q.
13 Q.
13 this letter. You sent it certified, right?
Now, sometime later-- let me ask you this question:
Now, let me direct your attention to the second page of
14 Were the questions that you posed in that letter, were they
14 A.
15 answered by the IRS?
15 Q.
And you got the certified retwn receipt here?
16 A.
Yes.
17 that letter, I did make a note that if! did not receive
17 Q.
Now, the second page of this letter that I have got on
18 answers to the above requested infOIID:J.tion within ten days of
18 the screen, its kind oflight, but is this the series of
No, they were not And I, in the last paragraph of
16 A.
That's correct.
19 certified receipt dale, it will indicate to me that even in
19 questions that you were posing at that time to this addressee
20 absence of receipt ofaForm2358C, which is af01m that says
20 of this letter, Mr. Gaither?
21 I'm not required to file, that you, the IRS, are in agreement
21 A.
Yes, they are.
22 with my assessment that there is not a requirement for me to
22 Q.
Okay. Describe those questions for us.
23 A.
Well, my monitor is a little blurry.
23 return to you a completed F01m 1040.
MR. BECRAFT: May I approach the wirness, Your
24
24
THE COURT: You can focus it and make it a
25 little larger.
25 Honor?

561
l A.
Thats fme. The [liSt question that I posed-
2 actually, I said, therefore, if you feel I have been

3 misinformed regarding the above infOIID:J.tion, please provide me
4 with the following or give me an appointment with someone who
can. And this was based on Internal Revenue Code 6110. The
562
mind about the importmce of being told about what statute
2 makes you liable for the federal income tax?
A.
Well, under the Privacy Act, the 1040 form said, it
4 said that those- the 6001,6011 were the regulations under

5 which I was required to file the 1040 form. And in my
6 first question that I asked them to address was the statute
6 research, I had determined that that f01m was not applicable
7 asking them for the statutes and implementing regulations
7 to the individual income tax based on the cumulative bulletin
8 which required that I file a tax return. Two, I wanted the
8 index and that the form 2555 entitled foreign and earned
9 statutes and implementing regulations which specifically
9 income did not apply to me, and I was wanting the IRS to clear
10 designate the exact tax for which I am liable for on the 1040
10 up this confusion for me.

And nobody :tiom the IRS ever scheduled an appointment
11 form. Third question, the statutes and implementing
11 Q.
12 regulations which authorizes the IRS to enforce number one,
12 with you?
13 the statutes and implementing regulations which authorizes the
13 A.
No, they did not
14 IRS to compute taxes, penalty and interest based on income
14 Q.
Nobody called you and said, Ms. Kuglin, here is the
15 reported to you by any employer-- I'm sorry, my employer,
15 answer to your questions?
16 banks, etcetera, as shown on page five of your Jetter. And
16 A.
No, they did not.
17 five, in lieu of one through four above, a letter 2358C
17 Q.
Okay. Lets say by December 30 --well, Christmas of
18 determination letter stating to me that I am no longer
18 '95, what did you think- what went through your mind, here
19 required to file a tax return. I am receiving -- lets see, I
19 you have sent two letters to the IRS asking them questions and
20 am reserving all of my rights in this matter. Respectfully
20 nothing has happened?
21 awaiting your reply, V emice Braendli Kuglin.
21 A.
22 Q.
Did you receive any reply to this letter?
22 I bad asked the question what regulation - excuse me, what
23 A.
No, sir, I did not. Not to the questions 011 this
23 implementing regulation made me liable for the individual
Well, by December of 1995, as a result of the fact that
24 letter.
24 income tax and what Jaw required me to file F01m 1040, I had
25 Q.
25 asked this question through letters, I bad asked it personally
What was so importmt- what was going through your
DIRECT - VERN!CE KUGLIN

563
to IRS agents, and 1 got no response, so it was indicative to
2 me or 1 came to the conclusion that since they had not
responded to me in regards to that question, that my research
4 and my data was accurate, and 1 made the decision at that
point in time to stop my withholding.
6 Q.
Did you have a willingness. if answers had been
7 obtained by you to your questions, did you have a willingness

to go ahead and file rerurns and pay the taxes?
9 A.
Absolutely. And even later on when 1 hired an
I 0 attorney. which 1 was told to do by the IRS agents, to write
564
got there, 1 realized - 1 was actually told how to file this
2 form, and 1 flled an exempt W -4 form
3 Q.
1 think the jury has, without getting into the
4 substance of that -- let me withdiaw that and ask you to

5 summarize the position that you take in reference to that
6 exempt W-4 form dated December the 30th, 1995?
7 A
On the W -4 form, it says in number seven, 1 claim
8 exemption fiom withholding for 199 -- this said 1995, and 1

9 certify that I meet both the following conditions for
10 exemption: One. last year 1 had a right to a refund of all
II my letters for me,! thought that perhaps if they were
11 federal income tax withheld, because 1 had no tax liability;
12 ignoring my own letters that they would not ignore the letters
12 and, rwo, this year, 1 expect a refund of all federal income
13 of an attorney. that 1 asked them to ask the same questions.
13 tax withheld, because 1 expect to have no tax liability. In
14 Q.
14 view of the fact that 1 had determined, based on all the
Okay. Now,youfiledDecember3lst, !995forthefrrst
15 time an exempt W -4 form, correct?
!5 documentation that I received, that 1 was not a person who had
16 A
Yes.! did.
16 been not- that had not been made liable in Section 6001 and
17 Q.
Do you have that in front of you?
17 6011. that for the individual income tax that 1 qualified for
18 A
Yes,! do.
18 this as a perron who had no liability.
19 Q.
Okay. Can you explain that to us, what you did?
19 Q.
20 A
Yes, this is a Form W-4, 1990- it is actually dated
20 out and look at them, but do you recall, we have got in
Let me ask you-- 1 don't think we need to pull them
21 1995. By December the 30th. 1995,1 had made a decision that
21 evidence here the other subsequent Forms W -4 that you
22 I would stop my withholding until such time that 1 got an
22 submitted to FedEx.
23 answer to my rwo questions from the IRS. I went into my
23 A
Yes.
24 employer, FedEx, anticipating that I might have a little
24 Q.
Okay. Is it your recollection that they say exempt on
25 difficulty persuading them to accept my W -4 form. but when I
25 them as well?

565
1 A
That is correct.
2 Q.
Let me ask you some questions about that group. You
566
Q.
Let me withdraw these questions. Are you cognizant of
2 the fact that you claimed exempt on those form'?

3 A.
Yes,! am.
Yes,! did.
4 Q.
Let me ask the questiOIIS that don't relate to having
Q.
Can you tell the jury what that specific reason was?
5 the documents in fiont of you. Can you tell the jury why you
6 A.
Okay. Can you go over the years that we're talking
6 didso?
claimed exempt on all those later forms for a specific reason?

4 A.
7 A.
7 about?
Q.
Okay. You know. it's my recollection there's '97, '98,
9 '99 forms exempt W -4 -10 A.

11
Oh, yes, yes.

MR. MURPHY: rm going to object. 1 think a
12 better way to do it would be to show her the exhibits.

13
TI!E WITNESS: rm familiar with what he's
14 talking about.
15
TIIE COURT: .Mr. Murphy is right, though, mainly
16 because you can't ask the lawyer a fuct questicn
I claimed that exemption because 1 had been asking
8 questions, via letters and visits to the IRS, for the

9 implementing regulation that made me liable for the individual
10 income tax and the law that required me to file a 1040 form.
II 1 had not gotten responses to those letters, and based on all
12 of my research and study. understanding from the court ca.o;es,

13 especially Jack Cole versus McFarland that my right to earn a
14 living was a right of common occupation and, therefore, could
I 5 not be taxed under the individual incane tax.
!6 Q.
Let me ask a couple of final questions, if! may, Ms.
17
TI!E WITNESS: Okay.
17 Kuglin. You agree that for'%,'97,'98, '99. 2000.2001.
18
TI!E COURT: That is why they usually pass it
!8 you didn't send in I 040 foons to the IRS, right?
19 up. Why don't you pass it up, make sure that we have got
!9 A
That's correct.
20 the document?
20 Q.
On April 15th. after all those yeaJS, all the way up
21
MR. BECRAFf: Judge, 1 don't know if! have the
22 numbers real handy.

23 Q.
Oh, wait, 1 think 1 gave them to you. Do you see one
24 later?
25 A.
Oh, yes,! do. Well, no, I have got a copy.
21 through April 15th of2002. did you have a belief that you
22 were required by law to file those forms? Did you have a

23 belief that you were required to file the forms?
24 A
What were the dates that you just gave me?
25 Q.
For all the years covered in the indictmenl, '96

567
568
through 2001, I think April 15th, after every year.

2 A.
No, I was not under the belief that I was required to
3 file the Form 1040 form.

4 Q.
2 Q.
Ms. Koglin, from 1993 all the way up through April of
3 2002, did you engage in tax evasion?
Okay. In reference to filing, give us what your belief
5 was, very specifically.

6 A.
I filed exempt.
4 A.
I did not I always offered to pay my taxes that I was
5 liable for.
My belief was that I was not a person that the
7 regulations had made liable for the individual income tax and
that there was no law requiring me to file the I 040 form.
MR. BECRAFI': One moment, Your Honor, if I may.
MR. BECRAFI': Nothing further, Your Honor.
I 0 you submitted, starting also with the one dated December of
10
MR. MURPHY: If I can have a minute to get my
I I '95 and the subsequent ones, did you believe that any
11 stuff ready.
12 statement that you had made on those was false?
12
13 A.
13 away my stuff.
9 Q.
Now, in reference to all those exempt W-4 forms that
I did not believe that In fact, I attached to my -
MR. BECRAFI': Well, I need a minute to pull
14 first the 1995 one some documenlation which substantiated my
14
15 belief.
15
THE WITNESS: Do you want these exhibits now?
16 Q.
16
MR. MURPHY: No, that's fine.
17 those forms W -4 were -
17
Thank you, Your Honor.
18
18
Did you believe that the statements that you submitted
MR MURPHY: Judge, rm going to object to the
19 leading.
21 Q.
CROSS EXAMINATION
19 BYMRMVRPHY:
TilE COURT: Objection sustained.
20
THE COURT: That should work out fme.
Okay. What, if any, belief did you have regarding the
20 Q.
Ms. Koglin, I want to start with some of these cases
21 that you based your conclusions on. Now, you would go over to
22 truthfulness of your exempt W-4 forms?
22 the Memphis State - when I was there, it was Memphis State --
23 A.
23 it was the University of Memphis law library and study?
I believed that it was true, I believed that I did not
24 have taxable income for the year -- the prior years. I
24 A.
Yes.
25 believed that I did not have taxable income for the years that
25 Q.
And ifs true that law library has all sorts of
CROSS - VERNICE KUGLIN

569
570
materials dating back, you know, a 150 years to the present,
A.
Right.
2 correct'?
2 Q.
Now, the - this Jack Cole case.
3 A.
That's correct.
3 A.
Yes, sir.
4 Q.
Okay. Now, this Pollock case that you were talking
4 Q.
Now, that's not a case that dealt with the federal
5 about, that case was decided in 1880, wasn't it'?
5 income tax, was it'?
6 A.
That's correct.
6 A.
No, that was a case that dealt with stlte income taxes.
7 Q.
And that case overruled the income tax prior to the
7 Q.
Right. And they don't mention the federal income tax
8 16th Amendment, correct'?
8 in Jack Cole, do they?
9 A.
9 A.
No, they do not.
I 0 direct tax on property.
I 0 Q.
Okay. And the Oregon case, what year was that?
11 Q.
II A.
I believe that was a 1925, 1930 case. I would have to
What they said is that Congress had the right to levy a
Okay. But that-- that case was prior to the 16th
12 Amendment, correct?
12 look at it.
13 A.
That was prior to the 16th Amendment, thafs correct
13 Q.
14 Q.
The 16th Amendment is what gave us the modem income
14 either, do they?
That case, they don't deal with the federal income tax
15 tax, correct'?
15 A.
16 A.
16 between excises and occupations and individuals and
The 16th Amendment, yes, gave the Congress the power to
17 lay and collect income taxes from whatever source derived.

18 Q.
Right, from all income, right, from whatever source
19 derived?
20 A.
. 21 Q .
22 A.
No, they deal with-- more defining the difference
17 corporations.
18 Q.
Okay. So the answer would be no, they don't deal with
19 the federal income tax in that case?
That's correct, that's what the amendment says, yes.
20 A.
No, they do not
Now, the Brushaber is an 1896 opinion?
21 Q.
Now, the Flora case was decided in 1960, right?
No, Brushaber is 1913, I believe.
22 A.
I don't have the case in front of me, but I think
23 Q.
1913?
23 thats about right.
24 A.
After the 16th Amendment was passed.
24 Q.
25 Q.
Okay. You're correct, ifs a 1913 case.
25
I have got a copy of it.

MR MURPHY: May I approach the witness, Your
CROSS- VERNICE KUGLIN
571
572
Honor?
2
income tax, correct?
TilE COURT: You may.
2 A.
I would say that is correct. I would have to read
Is lhat a copy of the Flora case?
3 through it again.
4 A.
Yes.
4 Q.
Well-
5 Q.
What year was that decided?
5 A.
But r11 accept that.
6 A.
Actually. that was 1960. I was thinking it was
6 Q.
3 Q.
7 earlier.
8 Q.
Is lhat one of the cases you relied upon?
9 A.
Yes, lhat was one of lhe cases that I relied on to get
10 some of the information. yes.
MR. MURPHY: Your Honor, could we have this
11
ril show you where it talks about that.
Okay. But as far as you know, there's no other
reference to it?
9 A.
I will accept your -- that that is the case.
10 Q.
Well. you studied lhe case.
11 A.
I studied the case and I got information out of it, but
12 marked as an exhibit, please?
12 I don't know every line in every case. If you're saying
13
THE COURT: Yes. Exhibit43.
13 that's the only reference to it, then --
14
COURT SECURITY OffiCER: I got it.
14 Q.
You don't dispule that?
15
15 A.
I will not dispute that.
16 Flora Case.)
16 Q.
Okay. And it's one sentence, right?
17 Q.
17 A.
I will accept that.
Now. the Flora case was a case that involved lhe melhod
18 that you used to settle a dispute of the income tax. correct?
18 Q.
Well, why don't we have you read it?
19 A.
That's correct.
19 A.
If you want me to know everylhing lhat is in every
20 Q.
Okay. Whether you could go to district court or tax
21 court?
20 case, I cannot do that today. I gleaned information -- I was

21 looking for supporting documenlation for the answers of
22 A.
That was correct.
23 Q.
Okay. And, in fact, lhe Flora case is- starts at
22 questions I had.
23 Q.
Okay. I have got a page from Exhibit 43 up there, and
24 page 630 and ends at page 658, and !here's only one line in
24 it says our system of taxation is based upon voluntary
25 that case where they talk about the voluntariness of the
25 assessment and payment, not upon distraint. A full payment
573
2 part payment rule would work at cross-purposes with it.
574
what that document is?
requirement will promote the smooth function of this system; a
2 A.
This says it is an individual income tax return Form
3 A.
Right. And I have no disagreement wilh lhat sentence.
3 1040 for 1992 and has my name on it.
4 Q.
Okay.
4 Q.
Okay. Is that a copy of your 1992 tax return?
5 A.
Yes.
TilE COURT: Would you pull the page down so we
6 can see the top of the page where the case name is?
MR. MURPHY: Your Honor. we would ask this be
TilE COURT: Thank you.
THE COURT: 44.
9 Q.
Now, the Arlcansas case that you cited is part of the
10 basis for your study. That case didn't deal wilh the federal
10 1992 Tax Return.)
1 1 income tax. did it?
11
12 A.
12 government's- that was Exhibit Number 9 previously. I
No. it did not. It dealt with an excise tax or a tax
MR. BECRAFT: Your Honor. that was
13 that was being laid by lhe legislature of Arlcansas.
13 lhought.
14 Q.
14
And, in fact. those courts that dealt with those state
MR. MURPHY: Judge, I don't think it is.
15 cases, they weren't federal courts, were they?
15 don't think we admitted-
16 A.
No, lhey were not. They were the state Supreme Courts.
16
17 Q.
Okay. Ms. Kuglin, you don't have the W-4s up there, do
17 assessments, and lhis is the 1992 tax return. It appears
18 you?
THECOURT: Number9wasthecertificateof
18 to be separate.
MR. MURPHY: Judge, I cannot find theW-4s, but
19 A.
Ihavemy--lhe 1995 W-4.
19
20 Q.
Okay. Can I have lhe 1995 W-4 form?
20 I have got some copies and I'm going to use some copies.
21 A.
Yes.
21
22 Q.
You filed income tax returns and paid your income taxes
22 sure. The W-4s should be Exhibit 15.
23 from sometime in the mid '60s up until 1992, is that correct?
23 Q.
THE COURT: All right. You just need to -
Do you have those up !here, ma'am?
24 A.
That's correct.
24
25 Q.
And rm going to show you a document. can you !ell us
25 those to the witness during my examination. I lhought 13.
MR. BECRAFT: Ifl may, Your Honor, I did hand
576
575
marked as an exhibit. Well, I don't think we need to do
14 and 15 may be up there on the witness stand.

2
TIIE WITNESS: Well, let me look again.
2 that.
TIIE COURT: Sure, Exhibit 15, and then--
3 Q.
TIIE WITNESS: What were they originally,
Can you tell us - lefs have it marked as an exhibit.

TIIE COURT: 45.
5 Larry -- Mr. Becraft?
MR. MURPHY: I had her testify about it.
MR. BECRAFf: Sbrts around 13. 15, I believe,
7 is a collective exhibit, Your Honor.
TIIE COURT: That's no problem
TIIECOURT: Okay. Youmayproceed. Youcan
9 use your copy.

MR. MURPHY: Judge, that's fme.
10
l988Form 1040.)
9 Q.
How many exemptions do you claim on that W -4?
10 A.
It says six exemptions on there.
ll Q.
Ms. Kuglin, we're going to use some copies.
ll
12 A.
All right.
12 the next numbered exhibit.
13 Q.
Can you la.ke a look at Exhibit44?
13
14 A.
Yes.
14 46, the new one?
MR.MURPHY: Now,ifwecaohavethismarkedas
TIIE COURT: Are we- is this 45, or is this
15 Q.
In 1992, you had one dependent?
15
MR. BECRAFf: I wrote down 45.
16 A.
Yes, sir.
16
TIIE COURT: I tell you what, let me la.ke a look
17 Q.
Okay. And would you la.ke a look at this document, it
18 appears to be a 1988 Form W-4. Do you recognize that
17 at it and ask you - this is Exhibit-- lefs talk at side

18 bar.
l 9 document'?
19
MR. MURPHY: I think it is going to be 46.
20 A.
Yes, it has my signature on it.
20
TIIE COURT: I want to see 45, and, Mrs. Saba,
21 Q.
Okay. And is that a W-4 you submitted out at FedEx?
21 we need to get them all - we just need to get them all
22 A.
Yes, it is.
22 sequentially sorted. It looks like we're having a little
23 Q.
Okay. And what date did you submit it'?
23 problem here.
24 A.
I submitted this on June the 7th of 1989.

25
24
TIIE WITNESS: I have 37 and 40 here also.
25
TIIE COURT: Let's pick them all up.

577
578

2 bench.)
3
4
Q.
What date did you submit it'?
2 A.
I submitted this oo ll-26 of 1990.
TIIE COURT: Is there a45?
3 Q.
And how many exemption.' did you claim"
MR. BECRAFf: That's the - no, no, 44 is
4 A.
It shows l 0 exemptions.
5 Q.
Thank you. Now, at the time, was your son living with
the-
TIIE COURT: 44 is the-
6 you?
MR. MURPHY: There is not a 45.
7 A.
TIIE COURT: 44 is the '92 tax retum.
1990, my
SOD--
MR. MURPHY: Judge, we move this into evidence.
MR. MURPHY: It is right there.
10
THE COURT: 45, I think, is this.
lO
MR. BECRAFT: Is that46?
11
MR. BECRAFT: Yeah, thafs it, that's correct.
ll
TIIE COURT: That's 46. And it's the W-4 for
12
THE COURT: It is the 1988 W -4 form. This is
12 1990.
13 45. Okay. We'reokay.

14
MR. BECRAFT: No objections to their admission.
15
16 court.)
9 A.
13
No.
(Exhibit Nurnber46 was marked. Description:
14 1990 W-4 Form.)

15 Q.
Ma'am, I'm going to pass you another document. Can you
16 tell us what that document is"
17
THE COURT: Got them in order now?
17 A.
Yes, that's a 1995 W -4 form.
18
MR. MURPHY: I think so, Judge.
18 Q.
And is that your W-4 form?
19
THECOURT: Ithinkso.
19 A.
Yes, it is.
20 BY MR. MURPHY:
20 Q.
And what is the date oo that form?
21 Q.
21 A.
That's December 30th, 1995.
22 Q.
Ma'am, rm going to pass to you another document, what
22 document is that?
23 A.
This is- this is a 1990 Form W-4.
23
24 Q.
Okay. And was that a W -4 you submitted to FedEx?
24 marked as the next numbered exhibit?
25 A.
Yes, it is.
25
MR. BECRAFf: It has been admitted into

579
580
of this form is not there.
evidence, Your Honor.

2
MR. MURPHY: We can't fmd it, Judge, and--
2 A
Yes, this is a W-4.
mE COURT: Mrs. Saba, we need Exhibits 13, 14
3 Q.
Does that appear to be a --
4 and 15.
MR. BECRAFT: I have it as Exhibit 17, Your
6 Honor.
THE COURT: It won't do any lwm for us to mark
8 itas47.
4 A
For 1996, yes.
5 Q.
- government document?
6 A
Yes.
7 Q.
Is it similar to the document that you executed?
8 A
Yes, it is.
THE CLERK: 13, 14 and 15?
10
mE COURT: The collective W-4 forms are
lO form marked as an exhibit.
II Exhibit 15.
12
MR. MURPHY: Judge, rve gotl5.
13
THE COURT: Okay. We're all right We will
14 not mark the other document as47.
MR. MURPHY: We will withdraw that. Your Honor.
15
mE COURT: Okay.
16
MR. MURPHY: Judge, could we have this blank
II
TI!ECOURT: Yes,thatwillbe47.
12
(Exhibit Number47 was marked. Description:
13 Blank Form 1040.)

Ma'am, what I'm going to put up here this is thi' Form
14 Q.
15 1040.
16 A
Yes.
17 Q.
Okay. Now,thisisyourl995--orl996W-4?
17 Q.
You see the part where it says exemption from
18 A.
That's what it says. It has got 1996 crossed out and
18 withholding?
I 9 1997 on there. One of the situations that would happen at
19 A.
Yes,Ido.
20 FedEx is they didn't always have_ the current year forms.
20 Q.
Could you read that for us?

The- from where it says withholding or the yellow
21 Q.
Is that a form that you claimed exempt on?
21 A.
22 A.
It is a form that I claimed exempt signed on January
22 highlighted area?
23 the lst of 1997.

24 Q.
Can you talce a look at this form and tell me what that
25 form is? Now, I don't mean to interrupt you, but the lop part
23 Q.
Why don~ you read exemption from withholding?
24 A.
It says exemption from withholding, read line seven of
25 the certificate below to see if you can claim exempt status.

581
If exempt, only complete lines one, two, three, four and seveo
582
A.
I believe that the testimony yesterday was to that
2 and sign the form to validate it. No federal income tax will
2 effect
3 be withheld from your pay. Your exemption expires February
3 Q.
4 18th, 1997. Note: You cannot claim exemption from
4 same sort of language up there at the top, doesn't it?
5 withholding if. one, your income exceeds $650 and it includes
5 A
Yes, it does. I would presume it does.
6 unearned income, for example, interest and dividends; and two,
6 Q.
And you earned interest in 1995 too, didn't you?
7 another person can claim you as a dependent on their return.
7 A
I would have to defer to the testimony yesterday.
8 Q.
Okay. Now, regarding your 1993 tax situation, the IRS
8 Q.
Okay. In 1996, you earned interest, didn't you?
Okay. And it's lrue, isn't it, the 1995 W-4 has the
9 A.
I did earn interest, yes.
9 levied against the taxes that had been withheld from your
10 Q.
Okay. Can I get that exhibit back from you?
10 paycheck, didn't they?
II A.
Yes.
II A.
12 Q.
Look for something else. Now, is that your 1998 W-4?
12 they did an additional levy.
They did not levy against the taxes that were withheld,
13 A.
That is signed by me on January lst of 1998.
13 Q.
Okay. Well, but they got all that money, right?
14 Q.
Okay. And again, this is coming from Collective
14 A.
Yes,I-in !993,wid!holdingwastalcenoutofmy
15 Exhibit 15. Can you read the language from the 1998 W-4 that
15 check.
16 begins up at the top with note?
16 Q.
17 A.
17 A.
rm presuming, yes, that FedEx sent it to the IRS.
18 Q.
And you didn't get a refund of a dime of your money in
It says: Note: You cannot claim exemption from
18 withholding, if, one, your income exceeds $650 and includes
And the IRS got al that money, right?
19 unearned income, for example, interest and dividends; and,
19 '93, did you
20 two, another person can claim you as a dependent on their tax
20 A.
No, I did not.
21 return.
21 Q.
Now, in 1994, the IRS got the withholding again, didn't
22 Q.
And this information was on the form when you signed
22 they?
23 it, correct?
23 A.
Yes, they did.
24 A.
Yes, it was.
24 Q.
Okay. And did you get a refund of any of that
25 Q.
And you earned interest income in 1998, didn't you?
25 withholding?

583
A.
584
MR. BECRAFT: One moment, Your Honor.
No, I did not file a I 040 form for a refund.
2 Q.
So you didn't get a refund in '93, correct?
3 A.
I did not file for a refund in '93, and I did not file
3 Q.
4 for a refund in '94.
Q.

Now, thai letter thai you just said you received, thai
4 was a letter from the IRS about your taxes, correct?
Let's back up a second and answer my question, you did
5 A.
Yes, it was.
6 not get a refund of your taxes in 1993?
6 Q.
Now, did you receive that letter from the IRS?
7 A.
7 A.
Yes, I did.
8 Q.
Okay. And is that also a letter - and you received
Q.
No, I did not.

You did not get a refund of your taxes in 1994, did
9 you?
10 A.
II
Q.
9 thai June of 1997ry

No, I did not.
10 A.
That was June 16th ofl997.
Okay. Thank you, ma'am Now, the IRS had a number of
II Q.
And thai's a letter about your taxes, isn't it?
12 contacts with you regarding your tax situation, correct?
12 A.
Yes, it is.
13 A.
That's correct.
13 Q.
Okay. And about asking - putting you on notice thai
14 Q.
For example, on October the 31st of 1995, did you
14 they have no record of your 1040 and indicating that they will
15 receive this letter?
15 assess tax penalties against you. correct?
16 A.
That letter looks familiar, yes.
16 A.
17 Q.
So do you believe you received it?
17
18 A.
Yes, I do.
18 as the next numbered exhibit.
MR. MURPHY: Made this as the next numbered
19
20 exhibit, Your Honor.
MR. BECRAFT: May I look at it, Your Honor? No
21
That's correct.
MR. MURPHY: Your Honor, we ask this be marl<ed
19
20
THE COURT: 49.
21
22 objections, Your Honor. I believe that's 48.
22 June 16, 1997 Letter.)
23
23 Q.
24
(Exhibit Number 48 was marl<ed. Description:
24 dated July the 16th of '97, what is that?
25 October 31, 1995 Letter.)
25 A.
Ma'am, I'm going to pass to you another document thai's
This is another letter from the IRS, the Department of

585
586
Treasury, dated July 16th, 1997. It says notice of

2 deficiency.
Q.
Q.
2 A.
And you didn't ever go talk to them about this?

I did not go talk to them. I had an attorney respond
And you received thai letter?
3 to this letter.
4 A.
Yes, I did.
4 Q.
5 Q.
And this is giving you notice of a deficiency and the
5 talk to the IRS about your tax silll:ltion?
Okay. But did you have an opportunity to sit down and
6 payment of your taxes, correct?
6 A.
Yes, I did.
7 A.
7 Q.
Okay. And you're not disputing that?
That's correct.
8 A.
rm not disputing that.
9 Q.
Ma'am, I pass a document to you dated June 28th, 1999,
10
THE COURT: 50.
10 can you tell us what thai is?
II
II A.
12
12 intent to levy, notice of your right IDa hearing.
This is a letter that says final notice, notice of
13 Q.
And thai is addressed to you?
14 A.
That is addressed to me.
15 22nd of 1999. And did you receive that letter?
15 Q.
And this particular letter gives you notice that the
16 A.
16 IRS is going to put a levy against you?
14 Q.
17
Ma'am, rm going to pass to you a document dated June
This letter looks fumiliar, June 22nd, yes.
MR. MURPHY: Your Honor, if we could have this
17 A.
That's correct.
18 Q.
Okay. And put a levy against you for your taxes that
19
THECOURT: 51.
19 you owe, correct?
20
20 A.
Thafs correct. The taxes that they say I owe, yes.
21
22 Q.
22 marl<ed as the next numbered exhibit?
Now, this letter thai has been marl<ed 51, this gives
MR. BECRAFT: No objections.
23 you notice thai you have got an appointment to talk to the
23
24 IRS, correct?
24
THE COURT: 52.
25 A.
25
Yes, it does.

587
588
that you, in fact, still owes taxes to the Internal Revenue
l June 28, 1999 Letter.)

2 Q.
Ma'am. I'm going to pass to you another letter dated
2 Service?
3 July the 6th, 1999 from the IRS. Did you receive that letter?
3 A.
4 A.
4 believes lhat I still owe them some taxes.
Q.
Yes.
Okay. And that letter is also a letter where there's
Yes, it tells me that the Internal Revenue Service
MR. MURPHY: If we could mark this as the next
6 an attempt to set up an appointment to sit down and talk with
6 numbered exhibit, Your Honor.
7 you about your taxes?
8 A.
8 Honor.
That's correct.
MR. MURPHY: Your Honor, if we could have this
MR. BECRAFT: Let me take a look at it Your
No objections, Your Honor.
I 0 marked as lhe next numbered exhibit.
10
THE COURT: 54.
II
ll
12
12 October 30, 2000.)
13
15 Q.
Ma'am, I'm going to pass to you another document Did
16 you receive this document?

17 A.
MR. BECRAFT: Your Honor, we probably going to
13
14 need a side bar on this.
14 July 6, 1999 Letter.)
I'm not saying I didn't. This document doesn't seem as
15
16
17 bench.)
MR. MURPHY: Judge, this is- Ms. Kuglin
18 familiar. I do know a copy was sent to Ray Pope who had my
18
19 power of attorney at that time in Florida.
!9 disputed pan of lhe assessment and collection process,
20 Q.
Okay. How about this rem4Ider document?
20 and there's a tax court opinion, and I would submit that
21 A.
This reminder document is familiar.
21 it was issued within the time to file for 2001 and that
22 Q.
Okay. And do you believe you received lhat reminder
22 that would provide her wilh notice of her obligation to
23 document?
23 file.
24 A.
Yes.
24
25 Q.
And what this reminds you-- document reminds you of is
25 government is coming from It bears a date of February
MR. BECRAFT: I don't understand where lhe

589
590
251h, 2002. I expect that the answer from this witness is
I just want a restroom break.
2 that she had her attorneys - she didn't find out about
3 that decision until right before this case got started. so
3 Anybody be upset if we take an early lunch today? I
4 if the witness' respCIIlSe is no foundation, no receipt, I
4 didn't think so. I don't blame you. We will take an
object to its admission.

6
MR. MURPHY: Judge, rm probably going to ask
7 her first if she took her case to tax court and if she
THE COURT: Why don't we take an early lunch?
5 early lunch, and then I will have a chance to talk with

6 the lawyers just a little bit about some things that will
7 come up later, and that will save us maybe time.
8 knows what the outcome of it is and when did she learn
9 that.
9 today. Don't let anybody talk with you about it and we
10
THECOURT: Okay.
II
MR. BECRAFT: If the answer is sometime after
12 Aprill51h of2002, I would object, Your Honor.

13
MR.MURPHY: Well,Ijustdon'tthinkthe
14 decision comes in then.

15
THE WITNESS: Your Honor, may I ask you a
18 question, please?
19
THE COURT: It would be better to let you ask
20 your lawyer a question.

21
THE WITNESS: All right. May I ask my
22 lawyer-23
THE COURT: You can walk around !here and ask
24 them.
25
10 will see all of you at 2:00. I will let the witness step
II down, of course, and I will hold the lawyers here for a
12 moment, we're going to go over a couple of more things.
13 We will let you be excused. Thank you very much.
14
(Jury out at 12:10 a.m.)
15
MR. BECRAFT: Can she waive her appear.mce in
16 the courtroom fora few minutes, Your Honor, and we can
16 court.)
17
Ladies and gentlemen, you get a long lunch
THE WITNESS: This is a physiological question.
17 proceed in her absence?

18
THE COURT: Is it okay we talk about a few
19 questions on lhe -20
THE WITNESS: That's fine.
21
THE COURT: In fact, I'm just going to talk for
22 a second about them, about the instructions.
23
THE WITNESS: rm in good hands.
24
THE COURT: Thank you. fmjust going to ask
25 them a couple of questions.

591
MR. BECRAFf: Go ahead.

2
TifE COURT: Gentlemen and ladies, we do need to
2 tr.msition into the willfulness discussion. I will
3 make sure that we have all of the materials that are going
3 probably use -- rm not real clear on this number 12. I'm
4 to be submitted by everybody. Can I get the materiaL<
4 not so clear that the proof-- wbat the proof ba< been on
that I got from -- that I sent back in the back that have
5 number 12.
MR. BECRAFf: Your Honor, could I respond and
6 the notations - I need the defendant's marked up
7 exhibits - instructions. proposed instructions. I might
7 withdraw?
have them here, let me look. I do have those proposed

9 instructions out here. Thanks.
Okay. Let me run through them real quick, the
10
II defendant's proposed instructions, the government's
TifE COURT: You're going to withdraw it.
MR. BECRAFf: I kind of like to offer to the
10 court kind of a series of instructions, kind of basically
11 get you in your frame of mind on willfulness. I will just
12 proposed instructions are pretty much out of Sand, and
12 tell the court wbat rm primarily driving at is the long
13 they're not very unusual. The defendant did have a few
13 one 18, I believe it is.
14 things that we need to talk about. I am going to try to
14
15 use just Defendant's I 1. Some of these are not a problem,
15 so is that not one you're going to pursue?
16 but we're not going to include the instructions on lesser
16
l 7 included offense. I'm just using -
17
THE COURT: Okay. Let me mark through it.
18
MR. BECRAFf: I'm sorry, Your Honor.
TifECOURT: Okay. Andiwasn'tsureabout 12,
18 because I wasn't so clear about that. Let me make a note
19
THE COURT: Lesser included offense.
19 about it then.
20
MR. BECRAFf: Okay.
20
21
THE COURT: We have already talked about. I'm
21 just tell the court.
MR. BECRAFT: Let me kind of pull -- I will
22 just using the Sand instruction, which is not much
22
23 different really fran the Devitt instruction on elements
23
24 of the crime charged.
24
25
25 think the court is already getting into anyway, but we can
And then we go over to willfulness. I will
TifE COURT: Sure.
MR. BECRAFT: Don't be concerned with 12, 13,

14, although 15 has relationship to one later on that I

593
594
pull 15, 16, and I think the court said in reference to
deterring others from committing crime. Well, that's
2 17, at least in reference to introductory instructions
2 true, that's always true. I don't usually have to give
3 that you gave, you seemed to indicate to me that you were
3 that, but that's all right. And I have some language from
4 going down that road.
4 one of the Supreme Court decisions which deals with 30,
TifE COURT: I have already got some language
6 about that
7
MR. BECRAFf: Yeah. Beyond that, that's--
5 but there's nothing wrong with 30, particularly.

6
MR. BECRAFf: All I'm asking, Your Honor, is
7 for the topic to be covered
TifE COURT: You may want to look at that I
TifE COURT: Okay.
9 did revise 18 just a little. Because we have to take out
MR. BECRAFT: The court can pick the language.
l 0 for failing to file any tax return, because there's no
10
ll lesser included offense, so I assume that's -- you want -
11 the commissioner does have the power to make a return and
12 that needs to go out, and I changed it and said if there
12 assess your tax when no return has been filed. Tbat's
THE COURT: Okay. And it is true in 31 that
13 is any doubt in your mind as to this issue- well. if
13 already been discussed. I mean they have done that in the
14 there's any reasonable doubt, that's the standard. I will
14 case.
MR. BECRAFf: Well, Your Honor, let me withdraw
15 change that. Olcay. We will use l8,ifwecan. l9is
15
16 correct, no reason not to use that.
16 it, because I did have some exhibits on that, but as the
17
MR. BECRAFf: The court is going to give it
18 then?
19
17 court saw, I kind of collapsed our exhibits and we didn't

18 cover that point, so, at least from our viewpoint, rm not
THE COURT: Well, defendant is not presumed to
19 insisting on it.
20 know the law, that's true. I mean they're not required to
20
21 be legal experts, so - otherwise, it wouldn't make much
21 need to be given. It's one of those things where it is
22 sense.
22 sort of surplus probably, and if you have withdrawn it,
23
~-:
592
probably use Exhibit - or number 11 as sort of a
Then I go over to the next thing that would be
TifE COURT: If you don't want it, it doesn't
23 there is no reason to worry about it.
24 includable probably would he probably 29. You hae no
24
25 right to find the defendant guilty only for purposes of
25 question is I have basically said at one point that the
And what I have done on the representations
- - - - - t n 7 t - - - - -

595
596
defendant can reply on Supreme Court decisions, on IRS
is we will tly to get you a copy of the draft material as
2 publications and regulations and instructions, which is
2 soon as possible after lunch.
3 true.
MR. BECRAFf: The court give an instruction
All rigbt. Gentlemen, ladies, thanks very
4 nruch.
5 like that, and I consider that to be then. therefore,

6 covered or covering this requested instruction.
TI!E COURT: Right. And Mr. Murphy agrees
(Lunch recess taken at t 2:25 until 2:00p.m.)

TI!E COURT: All right. The witness can come
7 back around.
8 that's the situation, so I don't see any reason- don't
MR. MURPHY: The government is ready, Judge.
9 you, Mr. Murphy?
TI!E COURT: Mr. Tuggle. we can bring the jury
MR. MURPHY: Judge, I don't have aoy objection
to in.
THE COURT: I think we have got everything
12
(Jury in at2:00 am.)
13 covered. I wanted to cover these, and I may have included
13
THE COURT: All right. Mr. Murphy, you may
14 some things now that I can -- I will narrow it down a
14 proceed.
10
It to that.
12
tt
COURT SECURilY OFFICER: Yes, Your Honor.
15 little more. Mr. Murphy, the eros. is going to take a
15
t 6 little while longer, right?
16 Q.
MR. MURPHY: Yes, sir, Your Honor, but I- you
17
18 know, I won't belabor it. I will make my points - part
MR. MURPHY: Yes, sir, YourHonor.

Ms. Kuglin, I want to talk a tittle bit about some of
17 these documents thai you contend you relied upon. You have
18 got the article by Ms. Claire Kelly'?
t 9 of the problem I was tlying to find what I needed, and I
19 A.
Yes.
20 will get up here before we come back from lunch, and I
20 Q.
Okay. I don't know thai you need to look at it. You
2 t will get organized.
21 can probably answer this without looking at it
22
22 A.
AU right
23 you have a chanee - that's a good thing to do.
23 Q.
But Ms. Kelly was not an IRS employee or government
24
24 official, was she?
THE COURT: Well, tbat's no problem. We'll let
I have got this sort of- I fine tuned a
25 little bit some of the Sand materials, so what we will do
25 A.
That's correct.
i
i

597
Q.
2 Justiee Times dated January of 1979?

3 A.
I believe so, yes.
4 Q.
Did you get this as part ofa package of malerials you
5 bought to drop out of the tax system?
6 A.
598
Okay. And Ibis is reprinted from a publication called
I cannot answer ten years later whether I bought this
7 malerial or whether I picked it up at a seminar. I picked it
A.
2 Q.
Yes.
He also doesn't hold himself out to be a government
3 official of aoy type, does he?

4 A.
No, he holds himself out to be an attorney at Jaw.
5 Q.
Okay. But you don't know whether he is or not, all you
6 know is you saw an advertisement?

7 A.
That's correct I've not met the man.
8 up for information only.
8 Q.
Must You Pay Income Tax, tbars another article you
9 Q.
9 cited; thars not a government publication, is it?
Okay. But Ms. Kelly is not a government official of
10 any type?
tO A.
No, it is not.
I t A.
Not thai I know of.
H Q.
Okay. And would you agree with the stalement in that
12 Q.
Okay. Now, what you also relied on was apuhlication
12 article that, quote, money is taken from the productive sector
13 called Deceptive IRS Code Words?
13 of society by the income tax to support the nonproduetive
t 4 A.
That's correct.
14 sector, foreign aid. give-aways in a bloated needless
15 Q.
Okay. And thai was the document that said shall
15 bureaucracy. Would you agree with that stalemenl made in tbat
t 6 doesn't mean shall?
16 document?
17 A.
That's correct.
17 A.
18 Q.
Okay. Now, that's not a government puhlication, is it?
t 8 thai there is information and there is knowledge --
19 A.
No, it is not, and I should say that I did not rely on
19 Q.
20 the document itself. That document Jed me to other
In reading all the material thai I came across, I fmd
Well, what I asked is would you agree with that
20 statement in tbat document'?
2 I information that I relied on.
21 A.
22 Q.
Okay. Okay. But tbars not a government document?
22 document
23 A.
No, it is not.
23 Q.
24 Q.
And this advertisement from W. James Knowles, attorney
24 is the Internal Revenue investigation.
25 atlaw?
25
I do not neeessarily agree with that statement in that
Okay. Turning to what was marked as Exhibit 28, this
MR. MURPHY: If I can approach, Your Honor.
'
599
600
TIIECOURT: Youmay.
2 A.
that had to do with the federal income tax under the Act of
I believe I have it here. Oh, no, I do not. There we
3 go.
4 Q.
2 1913 that had to do with United States residents. We didn't

3 admit that into evidence, but I have got a copy of it.
Now, that Internal Revenue Code investigation that is
4 A
Let me just look this over, briefly. Yes. I recognize
5 going on there, that wasn't an investigation that had to do
5 the document.
6 with income taxes, that had to do with the alcohol tax.
6 Q.
That's dated 1915?
7 correct"
7 A.
That is dated -- federal income tax under the Act of
A.
That had to do with the Internal Revenue Service, and
1913, and the date was 19- the date of this opinion was
9 it was Mr. Avis who was the head of Alcohol, Tobacco and
9 1915.
I 0 Firearms at that time.
10 Q.
Okay. Thank you.
11 Q.
11 A.
Thanks.
Okay. ButonThur.;day,Februarythe3rd,1953,when
12 these statement' were made, what they were talking about was
12
l3 politics and the alcohol tax department"
13 Your Honor.
MR. BECRAFT: No objections to the exhibit,
14 A.
That's correct.
14
15 Q.
Okay. And this statement about voluntariness of the
15 wilness?
MR. MURPHY: Your Honor, can I approach the
16 income tax. thars a one sentence deal, right?
16
17 A.
17 Q.
Yes, he was showing the difference between the income
18 tax side of the IRS and the A TF side.

19 Q.
Now, you also said you relied on whars been marked as
TIIECOURT: Youmay.
Ma'am. rm going to show you a bunch of 1040 relllrns
18 for 1996 through 200 l. Can you look at those. and do you
19 recognize those as 1040 returns?
20 Exhibit 40. I'll pass you a copy of that
20 A
Yes, I do.
21 A.
Thank you.
21 Q.
Now, highlighted on each one, there's an OMB number,
22 Q.
There you go, ma'am.
22 isn't that correct?
23
Now, that was treaswy decisions from 1916, correct?
23 A.
Thars correct.
24 A.
That's correct
24 Q.
What is that number?
25 Q.
Okay. You also, I believe, talked about a lreatise
25 A
That number is 1545-0074.
~&-1)

601
Q.
Okay. Now, if you would look at-MR. MURPHY: Judge, if we could move that into
602
Q.
Ma'am, ma'am.
2 A.
Yes, that is correct.
3 evidence as a collective exhibit, all those tax returns,
3 Q.
Is it all over there?
4 the blanks.
4 A.
It is all over that list, along with many other.;, yes.

Right, in several places. Would you look and see if
5 Q.
6 that number is at-- for Section 1.6012-1, that particular
7 Tax Returns.)
7 conlrol number?
8 Q.
And that OMB number is on every one of those, correct?
9 A
I am presuming that it is. I did not look at every
9 Q.
11 Q.
Look at every one, please.
II somewhere.
12 A
All right That's correct
12 Q.
13 Q.
Okay. Thank you. Now, was your study- you deseribed
13 the exhibits up. Do you see where I have circled?
10 one.
10 A.
That was I. -6012-1.

I don't find a 1.60. Maybe I'm missing it here
If! could take a look at it. I didn't want to mark
14 your study of the income tax law as a thorough study, correct?
14 A.
Yes.
15 A.
I believe it was as thorough as I could do of it
15 Q.
Okay. Now. it's true, isn't it, that that particular
16 Q.
Okay. Andbasicallyoneofyourcontentionsisthat
16 portion of the CFR has to do with individuals required to make
17 under the OMB requirements, and you submitted as Exhibit 37, a
17 returns of income and specifies that the Form 1040 return is
18 list of OMB conlrol number.; for documents, correct?
18 to be used?
19 A
That's correct.
19 A.
20 Q.
Okay. Now, those income tax returns had the number
20 applicable form for 1.6012.
21
1554-0074 on it, right?
21 Q.
It's saying on this form that the form 1545-0074 is an
Okay. Can you-- you see up here on the screen?
22 A
That's correct.
22 A.
Yes.
23 Q.
Now, that conlrol number is all over that list that you
23 Q.
Okay. And would you read the highlighted language?
24 A.
Yes, it applies to individual citizens or residents,
24 put into evidence, isn't it?

25 A.
Yes, that is correct However, the only number--
25 and it says in general except as provided in subparagraph two
~--------------------------------------------+fl~--------------------------------------------

603
604
of this paragraph, an income tax return must be filed by every
A.
rmsorry.
2 individual for each taxable year beginning before January 1st,
2 Q.
I need you to answer the question, that's what it says?
3 1973, during which be receives six hundred dollars or more of
3 A.
That's what it says, yes, sir.
4 gross income and for each taxable year beginning after
December 31st, 1972, during which be received $750 or more of
MR. MURPHY: Judge, could we have the CFR
5 marked as an exhibit?
6 gross income. If such individual is, one, a citizen of the
TilE COURT: Exhibit 56.
7 United States whether residing at home or abroad; two --
MR. BECRAFT: Your Honor, could we have a side
excuse me.
8 bar?
9 Q.
Let's-
TilE COURT: Certainly.
tO A.
--a resident of the United States even though not a
10
(fhe following proceedings bad at side-bar
11 citizen thereof; or, three, an alien bona fide resident of

12 Puerto Rico during the entire taxable year.
13 Q.
Okay. And then if you would flip over, would you read
14 that highlighted language?

15 A.
II bench.)
12
MR. BECRAFT: I think that the prosecution's
13 offer is for the whole rather than the part. that we have
14 covered in testimony.
Yes, this is number six, I believe, and it says forms
16 of return. Form 1040 is prepared for general use in malcing
15
MR. MURPHY: Judge, I will make copies and
16 substitute it later.
17 the retum required under this paragraph.
17
THE COURT: Just the passages.
18 Q.
18
MR. MURPHY: Just the passages. I don't have a
Now,youcameacrossthatsectionoftheCodeof
I 9 Federal Regulations in your research, didn't you?
19 problem with that, Judge.
20 A.
Yes, I did.
20
21 Q.
Okay. And, in fact, that's what that code says, isn't
21 court.)
22 it?
23 A
22
That is what that code says. That is not in the
TilE COURT: We're going to make copies of the
23 pages and passages that are referred to and not put the
24 whole book in.. because that would be too voluminous, so we
24 subtitle25 Q.
(fbe following proceedings were bad in open
Ma'am. ma'am.
25 will make copies of those particular passages that are

605
referred to.
2
MR. MURPHY: Judge, I will ta.ke care of that at
606
Q.
Well, rm talking about the OMB aspect
2 A
Oh, rm sorry, no.
3 the break, and what was the exhibit number for that?
3 Q.
There are several decisions that have rejected this
TilE COURT: 56.
4 argument that you don't have to file a tax return because of
6 CFR Passages.)
7 Q.
Do you have your IRS code book with you up there,
ma'am?
5 the OMB number, correct?

6 A.
That is not something that is of my knowledge. I will
7 accept that that is what you're stating that that is correct.

8 Q.
Okay. But you didn't-- you didn't go to those law
9 A.
!do.
9 books and conduct a search to see if the courts bad upheld
I 0 Q.
Could you open it up - oh, I don 'I mean to skip
10 this kind of argument, did you?
II around. Before we go there, now, did you look up- you bad
II A.
12 access to the Memphis State law library?
12 under the Paper Reduction Act.
No, I relied on the IRS's index which was required
Okay. If you would get your code book out, if you
13 A.
That's correct
13 Q.
14 Q.
And they have a complete collection offederallaw
14 would go to Section I.
15 books there, correct?
15 A.
16 A.
Yes, they have a lot of books there.
16 Q.
Section I reads tax imposed, correct?
17 Q.
Did you read the case of United States versus Wunder, a
17 A.
Yes, that's correct
18 Sixth Circuit, 1990 case?
18 Q.
And it- subsection C, it reads unmarried individuals
19 A
No, that is not familiar to me.
19 other than surviving spouses and heads of household?
20 Q.
So you didn't run across the Wunder case where they -
20 A
That's correct.
21 Q.
Okay. And it says- it follows that there is hereby
21 basically, the court rejected this type of argument having to

22 do with OMB?
23 A.
There are a lot of decisions that rejected this type of
All right
22 imposed on the taxable income of every individual other than a

23 surviving spouse as defined in Section 2 or the head of a
24 argument The courts don't seem to be able to agree on the
24 household as defmed in Section 2B, who is not a married
25 definition of income.
25 individual as defmed in 7703, a tax determined in accordance

607
608
1 A.
with the following table.
Well, I believe that that was Chief Justice's ruling,
2 Justice White in the Brushaber case, which actually defined
2 A.
That is what it says.
3 Q.
And you would agree that that is what it says?
3 income as an excise tax.
4 A.
I agree that's what it says.
4 Q.
5 Q.
Okay. Now, would you tum to Section 7203 of your code
5 in 1913,l'mtalkingaboutthecurrenttaxcode.
Well, I'm not talking about a tax code that they pas.ed
6 book0 Once you get to 7203, let me ask you some other
6 A.
7 questions real quick.
7 decision based on the --
A.
9 Q.
That was not a tax code, that was a Supreme Court
I have 7203.
8 Q.
Going back to your one, in your study of the tax code,
9 subject to income tax.
Ma'am, no federal court has held that wages aren't
10 you came across Section 1, didn't you?
10 A.
I believe the Brushaber case did.
11 A.
Yes, I did.
11 Q.
Well, after Brushaber, in the last hundred years.
12 Q.
Okay. So today is not the first time you're hearing
12 A.
1 don't-- 1 can't say that, because I haven't read all
13 about this?
13 ofthem.
14 A.
Not at all
14 Q.
Okay. But you did extensive research'
15 Q.
In fact, you came across it years ago, didn't you?
15 A.
Yes, I did research on cases which I had been given
16 A.
Yes, 1 did, when I was doing my research.
16 infonnation, would explain certain questions that I had, yes,
17 Q.
Now, in- what your belief is that the government
18 can't tax your wages or they can't tax your income you make as
19 a pilot, right'?
17 but I did not - 1 have not read every case, that would be
18 impossible.
19 Q.
Okay. Lookat7203.
20 A.
All right
21 that occupations of common right are not taxable as an excise
21
Now, that makes a penalty or provides that any person
22 tax. In other words, income tax.
22 required under this title to pay any estimated tax or tax
23 Q.
23 required by this title or by regulations made under the
20 A.
What my understanding is that the courts have ruled
Okay. Well, no federal court that has dealt- that
Q.
24 has applied the current income tax code has made that ruling,
24 authority thereof to make a return, keep any records or supply
25 have they?
25 any infonnation who willfully fails to pay such estimated tax
609
610
Q.
or tax make such return, keep such records or supply such

2 information at the time or times required by the Jaw or the
2 help you from the Uniled States Code Annotated. What does
3 regulations sball, in addition to other penalties, be guilty
3 chapter61 deal with.
4 of - and I'm just going to say a crime.
4 A.
It deals with gross income defined. Oh, 6001?
5 A.
Right.
5 Q.
Right.
6 Q.
But that provides that if you don't fJ.ie, you have
6 A.
Are you talking about Section 61 or Section 6001?
7 Q.
I'm talking about chapter 61 of subtitle A.
7 commiUed a crime, right'?

8 A.
I agree it says any person required under any tax of
9 this title shall make a return.

10 Q.
Right. Okay. Now, can you tum to 6651 of your tax
8 A.
Well, let me look for chapter 69.
9 Q.
This index might help you.
10 A.
All right. Okay. It says chapter--
11 code? Let me ask you this: You came across 7203 in your
11 Q.
What does it say there highlighted?
12 study of the tax code.
12 A.
It says subtitle A. income taxes, I'm looking for
13 A.
Oh, yes. What was the other section?
13 chapter 61.
14 Q.
6651.
14 Q.
Why don~ you go down here, what dnes chapter 61 say?
15 A.
I have it.
15 A.
This does not say chapter-- this is-- oh, chapter, it
16 Q.
6651, it's bUe, isn't it, provides for penalties for
16 says infonnation returns.
17 failure to file a tax relllm, an income tax return?
17 Q.
That does say chapter?
18 A.
18 A.
Right, right, I see what you mean now, because that
Well, it says any - the failure to file any return
19 required under authority of subchapter eight of chapter 61, it
19 other section referred to 61, and you brought-- right, okay,
20 says chapter 51, it says alcohol, tobacco, cigars, cigarettes,
20 now, I have got it.
21 cigarette paper.; and a list of numerous other ones.

22 Q.
Okay. And if- I have got an index here that might
Let's back up, Jet's talk about subchapter A of chapter
21
Q.
22 A.
It's true that it said We're on the same page.
23 61. Subchapter A, it's bUe, isn't it, that's the subchapter
23 Q.
Okay. So what it is referring to is --
24 of the Internal Revenue Code that has to do with income taxes?
24 A.
6001.
25 A.
25 Q.
6001?
I would agree with that.
~-.------------~--------------
CROSS- VERNICE KUGUN
CROSS- VERNICE.KUGLIN
6!1
A.
2 Q.
612
A.
Right.
Okay. Let's talkaboutwbat600l says. Now, it's
2 Q.
Yes, I did.
Okay. And you were aware of the regulation that had to
3 bue, isn't it, that 600 l says every person liable for any tax
3 do with the l 040s we talked about before you stopped filing
4 imposed by this title or for the collection thereof shall keep
4 income tax returns, correct'?
such records, render such statements, make such returns and
5 A.
I was aware of the fact that the l 040 said that the
6 comply with such rules and regulations as the secretary may
6 authority by which they could ask me to file, it was this
7 from time to time prescribe. Whenever in the judgment of the
7 section, 6001, section 6011
secretary it is necessary, he may require any such person

9 served - by a notice served upon such person or by
8 Q.
Okay. But you also testified you were aware of that
9 regulation we talked about?
l 0 regulations to make such returns, render such statements or
!0 A.
The regulation l.l-1?
l l keep such records as the secretary deems sufficient to show
ll Q.
Well, no, this was- rm talking about-- this
12 whether or not such person is liable for tax under this title.
12 regulation in this book. Remember, you read it, we put it on
13 The only records which an employer should be required to keep
13 the screen, it was in yellow.
14 under this section in connection with charge receipts, records
14 A.
It was, I believe, in the 6000 series of that section.
15 necessary to comply with Section 6053 and copies and
15 Q.
yes, Jna'am..
16 statements furnished by employees thereunder or employees
16 A.
Right.
17 under Section 6053.
17 Q.
You have been aware of that for several years?
18 A.
That's correct, that's wbat it says.
18 A.
Yes, I have.
19 Q.
Now,ifyouwouldtumto60ll.
19 Q.
Okay. In fuct, you were aware of that before you
20 A.
6011, I have it.
20 stopped ftling income tax returns?
21 Q.
Yes, ma'am. That says, it's bue -- and this - this
22 6001 section. you have known about that for several years?
21 A.
That's correct.
22 Q.
Okay. Now, 60 ll says when required by regulations
23 A.
Yes, I did.
23 prescribed by the secretary any person made liable for any tax
24 Q.
You knew about that before you stopped filing income
24 imposed by this title or with respect to the collection
25 taxes?
25 thereof shall make a return or statement according to the

613
614
forms and regulations prescribed by the secretary.
deals with individuals?
2 A.
Yes, it does say any person made liable shall.
2 A.
3 Q.
And it says shall, right'?
3 year.
4 A.
Yes, it does.
4 Q.
5 Q.
5 code for several years, haven't you?
Now, can you tum to- and this 611 section, you have
Yes, it says every individual having for the taxable
Okay. And you have known about that section of the
6 A.
Yes, I have.
7 known about that for years?
7 Q.
In the study of the case law, you have read a number of
8 A.
Oh, yes, it is tom out of my book.
8 cases that you told us about. Did you read the case of United
9 Q.
Okay. lfyoutumto6012,6012.
9 States versus Shift where the Second Circuit said -
10 A.
Yes, 6012.
10
ll Q.
Okay. Now, that provides, doesn't it, that returns
ll approach?
MR. BECRAFT: Your Honor, before we - may we
12 with respect to income taxes Ullder subtitle A shall be made by
12
THECOURT: Youmay.
13 the following?
13
14 A.
Yes, thafs what it says.
14 bench.)
15 Q.
It goes to list who has got to make the returns.
15
MR. BECRAFT: The prosecution is assuming fucts
16 Again, that says shall, doesn't it?
16 in evidence. lfthe government wants to try to impeach
l 7 A.
17 her with cases, I think the fU"St thing that must be done
Yes, it says each individual -- let me read this. Yes,
18 it says returns with respect to income taxes under subtitle A
18 is to confum whether or not the witness has any personal
19 shall be made by the following.
19 information or knowledge about the case that he's going to
20 Q.
Okay. Now- and it lists who-
20 be examining her on. If the witness says I don't know
21 A.
It lists individuals, it goes on and lists
21 anything about the case, then quoting from it or asking
22 corporations, every estate, be it political organization.
22 further questions about it, there's lack of personal
23 homeowners association, persons under disability, receivers,
23 foundation for the question then.
24 bustees, it goes on for several pages.
24
25 Q.
25 I don't think.
Let's back up a second. The fin;t section you come to
THE COURT: It wouldn't impeach her good faith,
~~::

615
616
MR. MURPHY: Well, Judge, I think it would,
is allowed. rm not saying -- inquiring into it ad
2 becau..e lhe Shift case is right on point about !he
2 nauseam would be inappropriate, because !here would have
3 voluntariness of !aXes.
3 to be some indication that !here was a case that a person
MR. BECRAFf: She doesn't know -
MR. BERNHOFT: The question isn't whelher her
6 belief is correct about !he law.
5 but not necessarily that she MR. MURPHY: Judge, what about !he general
MR. MURPHY: I understmd !hat. The question
4 would have had access to had !hey made diligent inquiry,
is, is !here a good failh basis for belief, and I think I
7 questions, in your research -- well -THE COURT: You're entitled to examine lhe
9 can go into lhe exlent of her --
9 lhoroughness of her research_
10
!0
MR. MURPHY: I think I can ask her this.
11
THE COURT: And I lhink you can ask her a few
THE COURT: You're going to her lack of
ll lhoroughness of !he inquiry'

MR MURPHY: Yes, sir. And that !hal would
12
12 questions about a specific case or two, but not ten cases.

13
MR. MURPHY: I won't, Judge.
14
THE COURT: What is lhe case?
14
MR. BECRAFf: How about !he substmce, Your
15
MR MURPHY: Judge, I just have a snippel from
15 Honor? It seems like to me, !hough, if !he witness has
13 result in a lack of good failh.
16 it, because I was going to do a Power Point, but I ran out

17 oftime.
17 its cross and it's a leading question, but to lead off--
THE COURT: I was just making sure it
18
16 not read it, having lhe government ask a question lhrough
18
THE COURT: I'm going to allow it on this case.
19 preceded-- it was during lhe period she did lhe research,
19 I mean !he government's argument- olherwise a person --
20 and I lhink it is. I lhink it would be unfair to ask her
20 it's somewhat of a logical inquiry, and I think you can
21 about a case -
21 test a person's logic.
MR BECRAFf: The witness doesn't know, is my
22
THE COURT: Well, I lhink that some inquiry as
24
MR. MURPHY: Judge, I won't beat lhe horse to
22
23 dealb, I lhink I'm getting near lhe end. I'm going to ask
23 point, Your Honor.
25 to !he lhoroughness of one's -- one person's investigation
24 her about !he '92 and '93 tax books.

25
THE COURT: Sure.

617
MR. MURPHY: And !hat's going to be about it

THE COURT: Okay.
ru overrule lhe objection
wilh !he limitations that we discussed.

4

Ir
2 A.
Right. And I may have read excerpts - many cases I
3 had experts from. !hat I did not actually go to lhe law

4 library and find !hose specific ca.es and read entirely
5 lhrough them.
6 court.)
6 Q.
7 BY MR. MURPHY:
7 going to put page two up here on lhe screen.
Ms. Kuglin, during lhe course of your research, did you
Now, one of your exhibits was Exhibit36. And I'm
8 A.
I can see.
9 come across lhe case of United States versus Shift at 876
9 Q.
Can you see it?
10 F.2d, 272, a 1989 decision, Second Circuit where !hey said to
10 A.
Yes, I can.
That says in - and this is from the instructions, lhe
8 Q.
618
didn't?
II lhe exlent !hat income !aXes are said to be voluntary,
ll Q.
12 however, lhey're only voluntary in !hat one files lhe returns
12 code provides for penalties for failure to flle a return,
!3 and pays lhe !aXes wilhout !he IRS first telling each
13 fuilure to supply information required by law or regulations,
14 individual !he amount due and then forces the payment of !hal
14 failure to furnish specific information required on return
15 amount The payment of income laX is not optional. Did you
15 forms or for furnishing fraudulent information_ Olher effects
16 run across !hal opinion?
16 of not providing all or part of lhe requested information may
17 A.
17 include lhe disallowance of cl:rimed exemptions, exclusion
I don't recall running across - there were many, many
18 cases I brought into court wilh me, lhe ones that I felt were
18 credits, deductions or adjusbnents resulting from an increased
19 lhe most descriptive of my !bought process, and I know !hat
19 laX liability, lhe loss of social security credits, loss or
20 !here are contradieting cases alllhrough lhe judicial system.
20 delaying lhe issuance of a refund for overpayment, interest
21 Q.
Okay. Solheansweris-
21 and penalty charges, unpaid taxes or other disadvantages to
22 A.
That is not one of !he cases !hat I chose to bring into
22 lhe taxpayer. Now, this is someoflhe language in this
23 lhe court. I may or may not have read it at some point in
23 notice that you claim you relied on in including !hat you
24 time, I can't confmn on !hat.
24 weren't required to file taxes, correct?
25 Q.
25 A.
So you could have read it, maybe you did, maybe you
Yes, !hat part that you just read does say !here are
~-..------~-------
CROSS- VERNICE KUGUN

620
619
A.
penalties for persons required by the law or regulations.

2 Q.
Okay. But this is- this is part of what you relied
2 Q.
Yes, 1992Form 1040.

Okay. And this is a government publication?
3 on in arriving to the conclusion that you didn't have to pay
3 A.
Yes, it is.
4 taxes?
4 Q.
Okay. And the 1992!040wasoneofthedocumentsthat
5 A.
Yes, Section 600 l and 60 ll of the beginning of that
6 paragraph -- those parngraphs.

7 Q.
A.
9 Q.
5 you relied on in arriving at your conclusion, correct, that

6 you didn't have to file taxes?
But what I'm saying is this document right here --
7 A.
l believe l did file a 1992.
Yes.
8 Q.
Okay. You filed --well, let me ask you this: Let me
- that you claim that says - makes the payment of
10 taxes voluntary, it also talks about penalties if you don't
9 back up a second. l may have something wrong here. !think!

10 got the right one now.
II pay. You relied on that in fomrulating your conclusion?
11 A.
All right
12 A.
12 Q.
Okay. What is this?
13 A.
This is- should be a 19-- well, there's no date.
l need to correct your sentence there. You said that l
13 relied on it to say that it was voluntary. l did not.

14 Q.
Ma'am, is the answer yes or no?
14 !993, yes, it's big letters, 1993 1040 form.
15 A.
Well, your question is wrong, Mr. Murphy.
15 Q.
16 Q.
Well, did you rely on the infonnation in this?
16 in making your conclusion or arriving at your conclusion that
17 A.
I relied on the infonnation that is written there.
17 you didn't have to file returns or pay taxes?
Now, this is one of the pJblications that you relied on
18 did not rei y on that infonnation to detennine whether or not
18 A.
I 9 the tax was voluntary or not
19 instructions to detennine if I was a person referred to in
20 Q.
20 600 I and 6011, yes, sir.
Okay. But-- so you did rely on this infonnation, you
21 read it?
I relied on the Privacy and Paperwork Reduction Act
21 Q.
So you relied-
22 A.
On the information in that document, yes.
22 A.
Yes, yes, l did.
23 Q.
Okay. l stand corrected on it.
23
24 A.
Thank you.
24 as the next lllllllbered exhibit?
25 Q.
Now, do you recognize this document?
25
MR. MURPHY: Judge, could we have this marked
TilE COURT: 47 --57. 57, excuse me.

621
(Exhibit NIDJiber 57 was marked. Description:
2 Q.
2 !993 Instructions.)
3
4
5 Q.
622
gross income, and the highlighted portion says $6,050.
Okay. And it also says use - this is chart A we just
MR. MURPHY: Judge, was that 57?
3 talked about, right?
MR. BECRAFT: Your Honor, I have 57.
4 A
Right, it says chart A for most people.
5 Q.
Okay. And it says use chart A on this page to see if
Okay. Ma'am, I am going to- rm going to put a
6 passage up there. This is from page four. Would you agree
6 you nmst file a return?
7 that it says if you do not file a retum, do not provide the
7 A.
information we ask for or provide fraudulent infonnation. the
That's right, it says use chart A on this paper to see
8 if you nmst file a return.
9 law says that you may be charged penalties; in certain cases,
9 Q.
I 0 you may be subject 1o criminal prosecution?
10 A.
All right
Okay. Would you read the highlighted language on page
II A.
That is what it says.
11 Q.
12 Q.
Okay. And, in fact, that's the same page that talks
12 15?
Okay. Okay. And I'm putting up page 15.
13 about the Paperwork Reduction Act, isn't it?
13 A.
14 A.
That is correct
14 salaries, tips, et ce1era. Show the total of all wages,
15 Q.
Now, fmgoing to show you page seven of that same
16 dOCIDDent, and this is a page that's entided Do I Have to
The highlighted language, it says -- it's under wages
15 salaries, fees, commissions, tips, bonuses, supplemental

16 unemployment benefits and other ammmts you were paid before
17 taxes, insurance, et cetera, or taken out for a joint return.
17 File?
18 A.
Yes, thafs what it says.
18 Be sure to include your spouse's income on line seven.
19 Q.
Okay. And there's a litde chart, and what does the
19 Q.
20 the amount that would -- that should be shown in box one on
20 highlighted language say?

21 A.
It says single, including divorced and legally
22 separated. It says filing -
Okay. And it goes on to say, included in this total,
rm sorry, it says marital
21 W-2, report all wages, salaries and tips you have received
22 even if you do not have a Form W-2.
23 status; single (including divorced and legally separated;
23 A.
That is what the form says.
24 second column is filing status, single head of household; age,
24 Q.
Okay. Now, referring to page 36, there's language
25 under 65, 65 or older, under 65, 65 or older; and then it says
25 there, would you read the highlighted language?

623
l A.
624
Yes. The fJTSt highlight says because you take a
2 frivolous position, and the other highlight says other
response is mandatory under these sections. Now, that's what

2 that section says, correct?
3 penalties can be imposed for negligence, substantial
A.
That is absolutely correct.
4 understatement of I3X and fraud. criminal penalties may be
4 Q.
Okay. And it also goes on in the underlying language
5 imposed for willful failure to file, I3X evasion or making a
5 to say if you do not file a return, do not provide the
6 fulse stalement.
6 information that we asked for or to provide fraudulent
7 Q.
7 information, you may be charged penalties and be subject to
Okay. And thafs all information that was in this 1993
I 040. pan of which you relied upon in arriving at your
8 criminal prosecution?
9 A.
That is correct, that's what it says.
10 taxes?
10 Q.
Now,l'm going over to Section 2, if you would look at
11 A
II page eight, ma'am. I'm going to put it up here, but -
9 conclusion that you didn't have to file a
I3X return
and pay
That is correct. that was information that I relied on
12 to determine if! was a person liable. yes.

13 Q.
Okay. Now, the document that I'm handing you, what is
12 A.
Page eight? I have page eight.
13 Q.
Under Do I have To File?
14 that document?
14 A.
Yes.
15 A.
That's a 1995 Fonn 1040.
15 Q.
It says use chan A, B or C to see if you must file a
16 Q.
Okay. Now, did you have a '95 1040 booklet like this?
16 return?
17 A.
Ibelieveso. Letmedoublecheck Yes.1995.
17 A.
That's correct.
18 Q.
Okay. And I believe you testified you used this
18 Q.
Okay. And if you go over here to chan A, it indicates
19 booklet in :riding your testimony, correct?
19 you must file a return if your gross income for single,
20 A.
Yes.
20 including divorced or separated if your gross income was
21 Q.
Okay. Now, if you look at what I have got up there,
21 $6400, correct. if you're under 65?
22 that first full paragraph, our legal right to ask you for
22 A.
That is correct, that is what it says.
23 infonnation is Internal Revenue Code Section 600 I, 60 II and
23 Q.
Okay. And turning to page 35, there's also a provision
24 60 12A under regulations, they say that you must file a return
24 on page 35 that provides other penalties can be imposed for
25 or statement with us for any tax you are liable for. Your
25 negligence, substantial understalement of tax, and fraud.

625
626
MR. MURPHY: Judge, if I could have one second
I Criminal penalties may be imposed for willful failure to file,
2 tax evasion or making a false statement. correct?

A.
I would like to see what the top - what the top of
4 that page is.
1HE COURT: Sure.
4 Q.
Ms. Kuglin?
5 Q.
Sure.
5 A.
Yes, sir.
6 A.
I'm looking for page 35 right now. All right. This is
6 Q.
Now, you have not filed a refund for all these taxes
7 under the section for general information, and it says other

penalties9 Q.
Well, this is under the section of interest and
7 you have paid all over the years, have you?

8 A.
Since 1993, that's correct.
9 Q.
Okay. And your general practice is on the day you get
10 penalties.
10 paid, you go down to the bank and you take out large amount'
11 A.
II of cash that same day or the next day, correct?
Interest and penalties, yes, I was looking at the
It depends. It depends upon what my flying schedule
12 general session, which starts - this section starts on the
12 A.
13 previous page. Under interest and penalties, yes, that is
13 is, whether I'm going to be in town for awhile and what funds
14 what it says.
14 I'm required to pay of my general bills which are not
15 Q.
And this is one of the books- is this one of the
15 automatically deducted. yes, sir.
16 publications that you u.o;ed in determining that you didn't have
16 Q.
I 7 to pay taxes?
17 A.
Yes.
18 Q.
-there's several big withdrawals like four, five, six
18 A.
This is one of the documents I used. I determined
But if you look at the bank records-
19 whether or not I had a liability --whether I was liable or
19 thousand dollars the day after you got paid?
20 had been made liable, yes. sir.
20 A.
21
MR MURPHY: Judge, if we could have this
22 marked as an exhibit.
:I
2 to look at my notes.
3
21
Thafs correct, yes.
MR MURPHY: I don~ have any further
22 questions, Your Honor.
23
23
1HE COURT: Redirect?
24
24
MR. BECRAFT: Can the witness be handed
25 1995 1040 Instructions.)
25 Exhibits 48 and 54 and 57 and 58?
Il l--------------------------------------~1~1~2---------------------------------------!
~-
REDIRECT - VERNICE KUGLIN

628
627
mE WilNESS: Would you like Exhibit 28 back?
mE CLERK: ril get it when I come up there.
was - earlier in the insbuctions, it said, I believe, if I

2 felt that I file exempt, that I would then fill out
MR. BECRAFT: Can I help her, Your Honor?
3 sections -- Section 7. Section 7 says I claim exemption from
mE COURT: Sure.
4 a holding for 1995, that I
mE WilNESS: Which one was that, Mr. Becraft?
5 following conditions or exemptions. Last year, I had a right
MR. BECRAFT: 28 through 54.
6 to a refund of all federal income tax withheld because I had
mE CLERK: There's 48 through 54.
7 no tax liability; and this year, I expect a refund of all
MR. BECRAFT: May I also get Exhibit 15, Your
8 federal income tax withheld because I expect to have no tax

9 liability. And the fuel that based on ..
9 Honor?
THE CLERK: It's probably in that other stack
10
certifY that I meet both of the
I 0 Q.
Can I point out here? Watch on the screen what you
ll io numerical order.
11 just read, see where that pen is?
12
12 A.
Yes.
13 Q.
On Government Exhibit-- I mean on Exhibit Number 17
13 BY MR. BECRAFT:
14 Q.
M<. Kuglin, I want to ask you some questions about the
14 down here at the bottom, it says 17.
15 W -4 forms that you submitted to FedEx. if I can.
15 A.
Yes.
16 A.
Yes, sir.
16 Q.
I am now pointing with the pen to number seven, which
17 Q.
The first one you submitted was in December of'95, is
18 that correct?
17 is about an inch below the -18 A.
Yes, that's correct.

And you relied upon your ability to file exempt because
19 A.
That's correct, December the 30th, I believe.
19 Q.
20 Q.
I'm going to flip it down here on the Elmo, and I want
20 the form said --
21 you to tell me what was it on this form that you thought
21
22 was - that you read that related to it being pennissible for
22 leading.
23 you to claim exempt. Can you kind of see?
23
24 A.
24 Q.
Is this what you relied upon?
25 A.
Yes, I did.
Yeah, if you move the form just slighted to your left.
25 A little bit more. Five, six and seven. Yes. Actually, it
REDIRECT- VERNICE KUGLIN

629
Q.
The language you just read?
2 A.
Yes.
3 Q.
Now, all these other Form W-4s, did they have the same
mE COURT: Objectioo sustained, it is leading.
REDIRECT-VERNICEKUGLIN
630
Q.
Now, was there something on this particular form that
2 you can direct our attention that allowed you to claim exempt?
3 A.
Yes, if you will move the form just slightly to your
4 language? rm going to go down on the scceen here to Exhibit
4 left under number seven, it says I claim exemption from
5 15, you see that? rm going to move what I think is a spot
5 withholdiog for 1998, and I certifY that I meet both of the
6 that would be similar.

7 A.
This is a 1998 form?
6 following conditions. And would you like me to read those

7 conditions?
8 Q.
rll show you, it says 1998.
8 Q.
First, is my pen pointed at the right spot?
9 A.
Right, 1988.
9 A.
Yes, it is, that is correct.
10 Q.
And this has a series of forms W -4 in it. Now, is
10 Q.
Could I get to you read that line?
11 there the same language that appears on this one that's in
11 A.
Yes. Last year, I had a right to a refund of all
12 1988?
12 federal income tax withheld because I had no tax liability;
13 A.
Under 6B, it says: I claim exemption from withholdiog
13 and this year, I expect refund of all federal income tax
14 because, and then A says last year I did not owe any federal
14 withheld because I expect to have no tax liability.
15 income tax and had a right to refund of all income tax
15 Q.
16 withheld; and this year, I do not expect to owe any federal
16 rm going to show to you a W-4 form for, I guess, 1998, is
l 7 income tax and expect to have a right to a refund on income
17 that correct?
I flipped to the next page in Exhibit Number 17, and
18 tax withheld. Yes, that's the same language.
18 A.
19 Q.
19 Q.
Your signature appears down there on the bottom?
20 we have also in one that I believe you testified on direct
20 A.
Right.
21 that this was the '97 one?
21 Q.
rm going to kind of move around on the screen and see
Now,let me just quickly-- in this particular exhibii,
22 A.
Yes, '96 is crossed out and 1997 is written io.
22 if my pen goes to the spot where you think it is important?
23 Q.
And on the screen, it doesn'tlook too good, but is
23 A.
That is correct, number seven.
24 that a date ofJanuary 1?
24 Q.
And is this what are you relied upon in claiming
25 A.
25 exemption?
I believe that's January 1, 1997.
REDIRECT - VERNICE KUGLIN

631
A.
2 Q.
REDffiECT-V8UITCEKUGLIN
632
Yes, I did.
Were these words important where rm flashing my pen
3 right now, because I bad no tax liability?

4 A.
Yes, those were the most important words in those two.
5 Q.
rm going to put my pen on, I think, the line of the
the individual income tax, and [ could fmd no law that

2 required me as such to complete the 1040 form.
3 Q.
Ms. Kuglin, I would like to ask you some questions
4 about that November of 1995 letter that you wrote to the ffiS,
5 do you remember that?
6 form that was important for you, is that correct?
6 A.
I remember that, yes.
7 A.
7 Q.
Can I ask you some broad general questions about it
That is correct, line number seven, and the words which
were essential where I bad no tax liability, and I expect to

9 have no tax liability.
10 Q.
Correct me if rm wrong, the same language appears for
11 this one for 2000?

12 A.
That's correct, number seven, [ bad no tlx liability
13 and I expect to have no tax liability.
8 without digging out the exhibit?
9 A.
Yes.
10
11
TIIECOURT: Yes.
12
13 bench.)
14 Q.
Okay. Now, 2001, same language?
14
15 A.
Yes, dated February the lOth of2000, same language,
15 that. Defense counsel is going outside the scope of
16 number seven, I claim exemption because I bad no tax. liability

l 7 and expect to have no tax liability.
18 Q.
Ms. Kuglin, what is it about being liable that is
MR. MURPHY: Judge, rm going to object to
16 direct. I didn't-- cross, I didn't ask about that

17 letter.
18
TilE COURT: I don't think be asked about that
19 important to you?
19 the '95 letter.
20 A.
20
The instructions on the l040formsaythatSection6001
21 and 6011 are the sections that I should rely upon to determine
MR. BECRAFT: Okay. All right Good enough,
21 YourHonor.
22 whether or not I am liable for the individual income tax
22
TilE COURT: Thank you.
23 and - or whether I have been made liable. And I found in
23
24 reviewing those sections and other sections of the code, I
24 court.)
25 could not fmd any sectioo of the code that made me liable for
25 Q.
Ms. Kuglin, do you have in front of you Exhibits 48 and
REDffiECT - V8UITCE KUGLIN

634
REDffiECT- VERNICE KUGLIN

633
Q.
54?
Let me stop you right there.
2 A.
I have 48 and I have 54.
2 A.
Yes.
3 Q.
Okay. Have you seen them before, that series of
3 Q.
You were directed to do what by whom?
4 letters?
5 A.
Yes [have.
5 It's hearsay and it's irrelevant.
6 Q.
Can I ask general questions without going 10 a specific
7 exhibit?
MR. MURPHY: Judge, I'm-- it's irrelevant.
TilE COURT: It is hearsay.
MR. BECRAFT: Okay, I will move on, Judge.
8 A.
Yes.
8 A.
9 Q.
Wbars the first letter dated there, 48, I believe?
9 that I bad not gotten answers to my specific questions, I bad
10 A.
This is a letter from the ffiS.
10 made a decision to hire --
11 Q.
Toyou?
II
12 A.
To me, dated October 31st, '95.
12 object to the relevance of this.
13 Q.
Did you at any time after that date in reference to
13
All right. I -- due to certain circumstances, the fuel
MR. MURPHY: Judge, objection, I'm going to
TilE COURT: Lees talk about it I need 10
14 these letters that you were getting from the Internal Revenue
14 check one thing.
15 Service that are there in front of you, Exhibits 48 through
15
16 54, did you make any effort to seek legal counsel?
16 bench.)
17 A.
Absolutely, I did. This number three 011 this forrn
18 dated October 31st says if you're not required to file, please
17
TilE COURT: She is not as.-=ting she relied on
18 the advice of attorney.
19 explain why. And I bad written the letter-- the November
19
20 letters asking the questions, explaining my -- the information
20 got Exhibits 48 through 54. She sought counsel and turned
21 that I bad obtained and asked for a response. When I did not
21 the matter over to counsel, tbaes - and that's the point
22 get a response, I bad an opportunity to go to the ffiS and
22 I want her to make. Not what counsel said, I'm not going
23 speak with an agent 10 get some response, and did not; and
23 to - rm not offering any --
24 then later I decided that it was time to- I was actually
24
25 directed 10 go to a law library or hire an attorney.
25 matter. The reason those letters come is they give her
MR. BECRAFT: No, my whole point, Judge, is she
MR. MURPHY: Judge, ! think that it doesn't
REDmECT-VERNICEKUGLIN
635
636
notice, and I can argue they gave her notice of the
MR. MURPHY: That is not what they're relying
2 requirement that she pay her income tlX.
2 on.
MR. BECRAIT: And we can show the context in
4 which the letters are sent to her, her response, which
MR. BECRAIT: It kind of ties back into those
4 other exhibits. You know, some of these letters will be
5 would include her luming the letters over to an attorney.
5 responsive. These letters offered here provoke the
6 response from the lawyers that are these other letters
1HE COURT: She doesn't have any- it's a
7 little confusing, though, because if she turned them over
7 that we have excluded, Your Honor.
8 to a lawyer and the lawyer said on my advice you shouldn't
9 do anything, then she can assert that and rely on it We
9 in the case that I can -- somebody- somebody can explain
10 might have a lawyer here, but she can assert that, but she
10 it so I will understand what it is, but I don't perceive
11 didn't do that rm a little confused about how -
MR. BECRAIT: The only point I want to elicit
12
1HE COURT: Well, it's not relevant to an issue
11 it as being a relevant issue in the case, because she

12 didn't do anything in response to the lawyers. I mean if
13 is she is unfamiliar with administrative procedures, she
13 she sent them to her CPA, then took no action because she
14 started receiving lettets, she sought counsel and turned
14 was awaiting a response from the CPA, I think you could
15 these matters over to her counsel and just leave it at
15 maybe show that we gave it to them and got no response.

16 am confused about how --
16 that
THE COURT: What-- Mr. Murphy, how does that
17
18 worlc'?
19
MR. BECRAIT: I think to address this question
17
18 of the government arguing closing, Your Honor, that they
MR. MURPHY: Judge, I think it is irrelevant.
19 were sent these letters --
20 I think the letters are significant for this reason: She
20
21 got notice that-- of the lax- that she owed taxes and
21
MR. BECRAIT: -- and they went to her.
22 taxes were due and owing during the period that she didn't
22
THE COURT: Right.
23 file. I don't think that the fact that she hired an
23
MR. BECRAIT: And she was silent. In response,
24 attorney has any relevance to the case.
THE COURT: Well, it would if she had -
25
1HE COURT: Right.
24 I think the defense can say, well, she received those

25 letters and at least turned them over -- sought counsel
637
638
and turned them over to counsel. To directly address what
appropriate question. If it turns out that's the only
2 I see is coming up in closing argument -
2 thing, Mr. Murphy's motion to strike will probably--
3 let's 11y it.
THE COURT: Turned them over to counsel, for
4 what purpose?
MR. BECRAIT: Sought advice about what to do.
THE COURT: She has never said she had gotten
7 any-
9 turning it over to counsel.
THE COURT: Okay. Okay. rm going to let you
11 ask the question, but then depending on how we go, it may
5 court.)
6 BY MR. BECRAIT:
7 Q.
MR. BECRAIT: We haven't got to the point of
10
Ms. Kuglin, in response to those letters that you
8 received from the IRS, let's talk about them collectively, 48

9 through 54.
10 A.
All right
11 Q.
Did you seek or --let me ask you this: Are you
12 end up that Mr. Murphy has a motion to strike. rm just
12 familiar with or what familiarity do you have with
13 not sure -- I don't want to cut off- if she has got
!3 administrative procedures regarding federal income taxes?
14 something meaningful to say on this poin~ I want her to
14 A.
15 get a chance to do it.
15 need to be followed. I am familiar, and I can't quote again,
16
MR. BECRAIT: But there's no legal opinion
rm familiar that there are special procedures that
16 I don't have the documents up here, that I have a right to ask
17 given by lawyers that directly relate to this, Judge.
17 questions, I have the right to seek counsel and I have a right
18 Ifs the mere fact that they were turned over to counsel.
!8 to have hearings, and that there's specific procedures that
19
THE COURT: Well, I think that's pretty
19 must be adhered to.
20 teuuous, but I think I ought to let her answer the
20 Q.
21 question and see what else -- you said that was stuff that
21 studied the point of what you should do if you gel letters
22 you needed to lake, and then you had some other stuff that
22 from the ms?
Did you have - in your studies, have you sat down and
23 you were going to lake. Well, if there is another step
23 A.
24 that follows that makes it relevant or just a preparatory
24 certain period of time and -
25 question or preliminary question, then it is an
25 Q.
The - the letters needed to be responded to within a
Listen to my question.
RED~ECT-VERNICEKUGLIN
639
l A.
Yes, sir.
2 Q.
Have you srudied- you have told us at length what you
640
MR. BECRAIT: I will back off. Your Honor.

2
3 have done in reference to the study -
3 A.
4 A.
4 what rm not allowed to -
Q.
Right.
-- the substmtive tax law itself, my question thai is
5 Q.
rm just not quite sure what rm allowed to answer and
There's no question pending, don't worry about it.
6 now pending is on a different matter, but it relates to taxes.
7 Had you engaged in any type of a study regarding
7 Q.
8 adminislr.ltive procedures in dealing with the IRS?
8 Murphy pointed out a couple of cases to you where maybe some
9 A.
10 Q.
THE COURT: Right.

Ms. Kuglin, in your studies of the income tax, Mr.
I know I have. I know I have. rm not --
9 of your issues have been raised by other parties, do you
Okay. That's fine. Have you studied it in detail so
I 0 recall that?
II you would comfortable enough --
II A.
Yes.
12 A.
12 Q.
He mentioned this Wunder case.
I have read it over. I did not feel that I knew enough
13 to respond, do the legal responses that! felt that these
13 A.
Yes.
14 letters were requiring.
14 Q.
Have you ever heard of Wunder?
15 Q.
And did-
15 A.
I don't believe that I have heard of Wunder.
16 A.
And so as a result of that, I felt that since I was not
16 Q.
And have you engaged in any type of a study down at the
17 getting responses to the letters I had written thai perhaps
17 law library or on any other occasion? I want to find out if
18 they were not in the proper fonnat and that if I hired legal
18 there are other cases that may relate to the ones that!
19 counsel, someone to write the letters for me, that the - all
19 believe in?
20 the intricacies that were required would be in those letters,
20 A.
21 and I wanted to make sure I had someone who was asking the
21 I have read. There's merchants- some of the documents
Well, I can probably - I have got a list of cases that
22 same questions that I had been asking.
22 explain the cases, if! might look at the documents.
23 Q.
23 Q.
Okay.
24 A.
There are cases like Isner versus McCulmer Merchants
To your knowledge, did your counsel offer any-
MR. MURPHY: Judge, we're now at a point that
24
25 it's not relevant.
RED~T-
VERNICE KUGLIN
641
l been talking about.
3 response. It's -
25 Loan and Trust that address these same issues that we have
RED~ECT-VERNICEKUGLIN
642
personally read thai I didn't know - I had read quotes from
2 the cases and I looked at these cases, the ones that I felt
3 would answer some of the questions that I had.
THE COURT: I think it's-
4 Q.
Okay. Listen to my question.
MR. BECRAFf: Let me back up.
5 A.
Yes, sir.
THE COURT: It's nonresponsive.
6 Q.
When you wanted to read a case and when you wanted to
MR. BECRAFf: Your Honor, I will back up and
7 go get it, did you find out about the case in some materials,
8 ask another question.

9
THE COURT: I think we need to ask a question
I 0 thai can be responded to.

II Q.
Cases that were brought to your attention were brought
8 explanatory materials that you were reading? For example,

9 pull out that folder one to Claire Kelly.
10 A.
Yes.
II Q.
Would the Claire Kelly article be similar to other
12 to your attention in some partieular way, is that correct?
12 articles that you would read?
13 A.
That's correct.
13 A.
Yes.
14 Q.
Would you have cases brought to your attention by the
14 Q.
Did these articles thai you read mention court cases?
15 various materials that you would read?
15 A.
Yes, it did mention court cases.
16 A.
Yes, I did.
16 Q.
What, if any, effort did you make once you saw a case
17 Q.
Okay. And if you saw a case in the materials that you
17 in such material as such, what effort would you make to try to
18 read, would you go down and try to locate the case and read
18 read the case?
19 it?
19 A.
I would go down and read the case and copy the case.
Okay. Now, for cases-- there are obviously cases that
20 A.
Yes, I did. That's what I did.
20 Q.
21 Q.
Did you make any effort to go to try to fmd cases that
21 were not mentioned in your reading material.
There were cases that were mentioned in the cases
22 you didn't know anything about?
22 A.
23 A.
Yes, I did.
23 themselves that! would go back and look at some of those
24 Q.
About cases that you did not know anything about?
24 cases which substmtiates some of the :u:gument in those
25 A.
No, these were cases that I had -- that I had not
25 cases.

643
Q.
But you wouldn't- ifthere was some case -MR. MURPHY: Judge. I'm going to object to him
644
we don't let them do that, because we want to actually
2 have a real answer. So I'm going to have to sustain that.
3 leading.
3 I explain a little bit to the jury so we all understand
4 that we need to avoid that.
THE COURT: Yes, objection sustained.

Q.
In reference to this case that Mr. Murphy asked you
5 Q.
What, if any, cases adverse to your position was
6 about, the WIDlder case, had cases like that ever been brought
6 brought to your attention?
7 to your attention by your reading material?
7 A.
A.
9 Q.
I don't know that specifically the Wunder case had.

Okay. Would you know about the existence of any other
I 0 cases other than what you would discover in your reading
Well, the Pollock case, for one thing, was adverse to
8 my position.
9 Q.
In what way?
10 A.
In the fact that it determined that an income tax was a
11 materials?
11 direct tax rather than an excise size tax.
12 A.
12 Q.
I would hear about cases when I went to seminar.; and
13 people who tllked about the different cases.
What, if any, other cases were brought to your
13 attention that indicated to you that your beliefs were
14 Q.
Now, looking at this from the totality.
14 erroneous?
15 A.
Yes.
15 A.
16 Q.
Were there any cases that you had learned about through
16 Q.
Let me withdraw it and I will frame it a different way.
17 this way that you were pursuing in reference to studying that
17 A.
Allrighl
18 gave you any indication that what you were reading and
18 Q.
Did you ever learn about any cases that might have
I 9 studying was wrong?
19 dealt with your issues that you talked about here in court
MR. MURPHY: Judge, I'm going to object to the
20
Let me think on that one just a little bil
20 over the last day and a half?
I don't know if I'm just tired or if I'm missing the
21 leading.
21 A.
22 A.
22 point of the questions.
No.
THE COURT:
23
I think it is simply too suggestive
23 Q.
Let me frame it another way. In your studies, in what
24 of the answer. A leading question is one that suggests an
24 you read. what. if any, cases did you fmd that rejected your
25 answer, and kind of like pitching somebody a softball. and
25 arguments? Did you find any?
REDmECT- VERNICE KUGLIN

645
1 A.
646
No. I fOIDld quotes in cases that I read that discussed
don't have that regulation sitting right in front of me.

Let me ask you this question: Can you turn to Section
2 other cases and differing opinions, but there were always
2 Q.
3 answers to those opinions explained in the cases given down
4 by - you know, the decisions given down by the judges in
4 A.
Yes, I can.
5 Q.
You were asked questions about tax imposed.
those cases.
I of the Internal Revenue Code?
6 Q.
All right. Good enough.
6 A.
Yes.
7 A.
So they questioned it, but they also gave an
7 Q.
In reference to corresponding regulations, do you know
explanation as to why those were not valid.

9 Q.
Mr. Murphy, during cross, brought to your attention
8 what regulation corresponds to Section I of the code?
9 A.
That is CFR -- 26 CFR I MR. MURPHY: Judge, I'm going to object because
I 0 this big thick book that we have had here this afternoon, the
10
11 Code of Federal Regulations.
I I I'm not sure what he means by corresponds because I don't
12 A.
Yes.
12 know that there's a corresponding relationship,
13 Q.
Have you seen that type of book before?
13 necessarily.
14 A.
Yes, I have.
14
15 Q.
Whereabouts?
15 question on this one.
THE COURT: Well, I'm going to allow the
Is there a regulation that applies to Section I of the
16 A.
The Code of Federal- excuse me, it's in the library.
I 6 Q.
17 Q.
Now, he directed your attention to a particular
17 code to your understanding?
18 regulation, is that correct?
18 A.
Yes, there's regulation I.l-1.
19 A.
lbat's correct.
19 Q.
Have you read that regulation before?
20 Q.
1.6012-l, correct?
20 A.
I have read parts of that regulation before. !don't
21 A.
lbat's correct.
21 know that I have read the entire thing.
22 Q.
And you testified that you have seen that before?
22 Q.
23 A.
Yes.
23 understanding did you have as to whether or not that
24 Q.
Why does that regu!ati on in your view not apply to you?
24 particular regulation solicited information?
25 A.
Let me go to the regulations or to the code, and I
25
Now, did you come to any understanding or what, if any,
Okay. I'll ask another question. Mr. Murphy brought
REDffiECT-VERmCEKUGLm
REDmECT-VERmCEKUGLm
647
648
to your attention that the Form 1040 instruction booklet has
section, under the Paperwork Reduction Act.

2 Q.
Yes.
3 6001,6011 and Section 6012 of the Internal Revenue Code?
4 Q.
I 040 form has an OMB control number, right?
4 A.
5 A.
Yes.
5 Q.
And you had read those sections of the Internal Revenue
6 Q.
Have you looked tbrough, I don't know the exhibit
6 Code a long ago?

Yes, I read it during the period of time I was
7 number, but we have offered it into evidence, that big long
7 A.
8 list of all these control numbers'
8 formulating my opinions.
9 A.
Yes, the control numbers that are in Section 602.
9 Q.
l 0 Q.
And in that particular list of OMB control numbers --
10 6001 of the Internal Revenue Code, what was it that was
II A.
Yes.
II important in that sectioo of the code that related to your
12 Q.
-- did you see when you first started engaging in this
What was it that was important -- when you read Section
12 beliefS about whether or not you were required to me
13 study that there were a lot of other regulations that listed
13 returns?
14 the same control number for Form 1040?
14 A.
15 A.
Yes, yes, I did. There was a laJge number of them
16 Q.
Okay. Out of that list ofOMB control numbers, what
It said that a person that was liable, any person
15 liable for any tax imposed by this title.

16 Q.
Did you determine whether or not you were liable
17 was it that was so important for you about how the I 040 form
17 pursuant to Section 61 --or Section 6001.
18 was to be or what relationship it had with the actual
18 A.
19 regulations themselves?
19 I read 60 II, which said a person made liable, and when that
20 A.
20 did not define whether or not I was a person made liable, I
Well, the- knowing that the individual income tax
21 regulation is regulation 1.1-l on that index, there was
I could not determine by just reading that, that! was.
21 then went to the index to determine whether or not there was
22 only - only one entry that applied to that particular
22 any section under subtitle A, taxes, which addressed the issue
23 regulation. and that one entry was the entry 1545-0067 which
23 of liability, and that's when I found the Section 1461, which
24 applied to the Form 2555, foreign earned income. And that was
24 said that the withholding agent for nonresident aliens and
25 of significance to me of that particular index and that
25 foreign corporations were made liable for the individual
REDffiECT- VERNICE KUGLm
REDmECT-VERmCEKUGLm
649
650
Q.
income tax.
2 Q.
Have you- what., if any, research about looking for
Is it your understanding that section 6012 would apply
2 to people who are liable?
3 the word liable in subtitle A of the Internal Revenue Code
3 A.
4 beyond the table of contents or the index, have you engaged in
4 agents of nonresident aliens and foreign corporations are
any type of search to fmd the word liable in subtitle A?

6 A
-~
Now, Mr. Murphy asked you some questions about Section
2 an OMB control number'

3 A.
Yes, later on when computers became available and this
Absolutely. I believe that foreign-- the withholding
5 absolutely liable and have a requirement to complete the 1040

6 form and also the Form 2555.
Let me ask one final set of questions. Do you have
7 information was on the computers, I did search under subtitle
7 Q.
8 A, individual income t1x for the word liable, and it came up,
8 that '93 1040 instruction booklet or '95 that you had up here
9 I think, three times, one - two times were in reference to
9 on the stand with you?
l 0 some dispute, and the only other time it came up was in regard
10 A
Yes, I do.
II to Section 1461 of subtitle A.
11 Q.
Okay. I was going to use these exhibits, but can you
12 Q.
Mr. Murphy directed your attention to Section 6012 of
12 use those, that one?
13 the Internal Revenue Code?
13 A
Yes,Ican.
14 A.
Yes.
14 Q.
All right Have you looked tbrough there to see--
15 Q.
Do you have a belief-- or what, if any, belief do you
15 your testimony is that you're an American citizen?
16 have as to whether or not you are required pursuant to Section
16 A.
That is correct
17 6012 to file 1040 forms?
17 Q.
All right Did you make any study of that instruction
18 A.
Well, based on the fact that I could only find one
18 booklet to determine how often the instruction booklet relates
19 section. 1461, in the entire section of individual income tax
19 to United States citizens?
20 that addressed anybody that was liable, and that was the
20 A.
Yes, actually, I did, and I, again, as I found out with
21 withholding agent of foreign corporations or nonresident
21
22 aliens. Yes, nonresident aliens and foreign corporations.
22 so I went to the index instructions of the 1040 form, and I
23 Since I did not fall under that category, then I made the
23 looked for the word citizen in that document, and I fmally
the Internal Revenue Code, that it is good to go to the index,
24 determination that I wa.< not a person that was required under
24 found one place where it was listed.
25 Section 6001, 60 II to complete the 1040 form.
25 Q.
What was listed?

651
I A.
652
the case among yourselves, don't let anybody talk with
Where the word citizen was listed.
2 Q.
Okay. And what was that?
2 you. We will see you in 15 minutes.
3 A.
And that was listed under the use, it says U. S.
THE COURT: We willie! you bave a seat, and
4 citizens and resident aliens living abroad, and that was the
5 only place that I could find any reference to the word
we're going to go over a few things.
6 citizen.
7 something real quick for the record?
MR. BECRAFT: One moment, Your Honor. Nothing
MR. BECRAFT: Your Honor, could I-- could I do
8 further, Your Honor.
THE COURT: Sure.
MR. BECRAFT: Could I renew my Rule 29 motion
THE COURT: All right. Thanks very much. We
I 0 will let you step down. Tbank you.
10 on the same grounds?
II
II
(Witness excused.)
THE COURT: This is a case in which there is --
12
MR. BECRAFT: We rest.
13
THE COURT: Ail right. The defense rests.
13 decisions about really any of the issues that are before
14
Will the government - and we're going to take
14 this jury. The jury is going to bave to decide
12 the rule simply doesn't conremplate the court making any
15 a break, but, Mr. Murphy, does the government anticipate
15 credibility questions and, therefore, there is sufficient
16 calling any rebuttal witnesses?
16 evidence for the government to proceed on each element of
17
17 the as.erted offense.
18
THE COURT: Ladies and gentlemen, that does
18
What we bave handed out to -- so motion is
19 conclude all the proof in the case. rm going to talk
19 denied. We bave handed out to you a set of instructions.
20 with counsel and see if we bave got our- I know we bave
20 Mr. Murphy, there is -- you both will note that there's
21 been working on the instroctions, we hope we're very
21 one that I baven'treally quite-- they bave got some
22 close, but that will take at least 15 minutes. This is
22 overlap. I may give both of them, it may be okay to do
23 our afternoon break, 15 minutes. If we can't get
23 that. You have got a cover sheet, and it runs quickly
24 everything done today, then, of coUISe, we will revise our
24 through some of the things that are very basic. I will
25 schedule. We will see you in 15 minutes. Don't discuss
25 flip through the pages with you. They're not numbered
653
654
because there's going to be reananged.
----:)
It begins with the general instruction, they're
those witnesses with the same type of inquiry that they

2 would anybody else. The reference to the indictment and
3 to decide the case and they're not to -- they're to follow
3 the reading of the indictment, and the reference to 59 .I,
4 the Jaw, decide it based on the testimony of other
4 which is the Sand instruction, which is the very brief
5 evidence, the fm;t two pages. And then the burden of
5 statement regarding evade or attempt to defeat any tax.
6 proof and reasonable doubt and what proof beyond a
6 Statutory purpose, which is 59-2.
7 reasonable doubt is. Talking about the evidence and wbat
they can consider, direct evidence and circumstantial

9 evidence. Also, reference that they can't take anything I
The elements, I combined the concept of the
8 elements contained in the defendant's Devitt reference

9 with the Sand one, and also with Mr. Murphy's statement,
10 bave said-- I baven't said much, can't take anything I've
10 and really it seems to be everybody's stalement that I'm
II said as indicating as to how the case should be resolved.
II going to bave to describe wbat an affumative act is a
12
12 little more, and I bave done that later on, and I've
Multiple crimes, that's 2.01A. that is
13 requested. Stipulations, I'm aware of one stipulation,
13 said - and I haven't made reference to the affumative
14 really, and that's the one as to Memphis Shelby County,
14 acts set out in the indictment beeause Mr. Murphy has
15 Tennessee being located in the Western District of
15 actually put in some proof about some things that might be
16 Tennessee.
16 affirmative acts other than the acts in the indictment,
17
17 but I'm going to talk about what those could be. Tax due,
Number of witnesses and credibility, that's the
18 standard instruction. The number of witnesses is not

19 controlling. Of course, that's an appropriate one.
20
Then credibility as to defendants. Since she
18 that's the first element, obviously.

19
Second element, affinnative act, I bave
20 actually elaborated on this somewbal In the middle of
21 did testify, we usually give the 7 .02B instroction, and
21 the paragraph of-- the second paragraph, there are
22 just say they apply the same things in detennining
22 different ways in which a tax may be evaded or an attempt
23 credibility of the defendant as any other witness.
23 may be made to evade it. For example, in this case, the
24
24 government asserts that Ms. Kuglin attempted to evade or
Law enforcement witnesses, we certainly had law
25 enforcement witnesses, and it just cautions them to treat
25 defeat the income tax by filing false Form W -4s for
.,_
656
655
application as to each year - each tax year alleged in
Court The Supreme Court bas defmed this element as
2 the counts in the indictment. I didn't say that -- I used
2 requiring proof of conduct, the likely effect of which
3 that for example language because the government also is
3 would be to mislead or conceal. In other words, in any
4 making the argument and bas put on proof abou!large cash
4 act which is likely to mislead, the government- or
5 transfers. It's not a rea.! strong one, so rm willing to
5 conceal funds satisfies this element. Thus, filing a
6 strike that.
6 false form, for example, a W -4 withholding form, or a
MR. MURPHY: Judge, what I'm going to argue -
7 false tax return is sufficient - there's no lost tax
8 rm not going to argue cash transfers were necessarily
8 return here, but that's an example - as are false
9 acts of evasion, but that they were --
9 statements made to the Internal Revenue Service after the
10
THE COURT: Let me tell you what I said aboUl
10 return was due or ftled. Large cash transactions may also
ll be evidence of an affirmative act of evasion. I said
ll it.
12
MR. MURPHY: Okay.
12 evidence of, Mr. Murphy, I didn't say an affmnative act.
13
THE COURT: And you may not find it to be- I
13 I think that's what I should say.
14 didn't say they were acts of evasion, I said it might be
14
15 evidence.
15 we're going to argue.
16
MR. MURPHY: That is what our position is going
THE COURT: That's what I said, I didn't say it
19 was. It could be, it can be an act. Anyway, I think

20 you're relying on theW-4s, primarily.
21
1HE COURT: And then it says it is not
17 necessary to prove a separate act constituting evasion for
17 to be, Judge.
18
16
MR. MURPHY: Judge, that's correct, that's what
I do go through the fact that the government
18 each year, tax year, which is the subject of the

19 prosecution; thus, filing a false W -4. I think in this
20 case you have got a W -4 for each year, but it can be for
21 filing a false statement for withholding form satisfies
22 bas to prove an affmnative act constituting evasion, that
22 this element as to each year for which it was in effect.
23 must be a positive act I say it's not failure to file or
23 I think that's the law, so - the third element is the
24 a fuilure to pay, which is lrue, that's not an affitmative
24 willfulness element. There is a lot of discussion here,
25 act, let me make that clear. I then reference the Supreme
25 and this is rea.lly more than either one of you submitted,
658
657
and if you don't like it, you need to tell me. Whether or
2 not the defendant acted knowingly and willfully is a
it certainty often arises even among taxpayers who

2 earnestly wish to follow the law. II is not the purpose
3 question of fuct to be determined by you based on all the
3 of the law to penalize frank differences of opinion or
4 evidence in the case. An act is done knowingly if it's
4 innocent errors made despite the exercise of reasonable
done purposefully and deliberately and not because of
5 care. Degrees of negligence give rise in the tax system
6 mistake, accident, negligence or some other innocent
6 to civil penalties. And I think that's fuir because we
7 reason. The government must also prove beyond a
7 have heard some things aboUl civil stuff. Tbe requirement
8 reasonable doubt the defendant acted willfully. A willful
8 that an offense be committed willfully is not met,
9 act is defmed as voluntary and intentional violation of a
9 therefore, if the taxpayer bas relied in good fuith on a
10 known legal duty, and we talked about the government bas
10 prior decision of the Supreme Court. The Interna.l Revenue
!1 to prove that.
12
And then we say willfully, defined further,
ll Code or the regulations and insttuctions published by the

12 Internal Revenue Service. Thus, the word willfully
13 referring to the Supreme Court case, one of the Supreme
13 under-- I think we have got our code number wrong here,
14 Court cases that we have been looking at. The word
14 it's 26, rm sure, isn't it?
15 willfully in the criminal tax statutes requires a
15
MR. MURPHY: Yes, sir, Your Honor, Title26.
16 voluntary, intentional violation of a known !ega! duty, so
16
1HE COURT: That's a typo. USC - U. S. Code,
17 repeating it, but then rm going to say more about it.
17 Section 7201, includes the concept of bad fuith or evil
18 The requirement of willfulness, therefore, means an act
18 intent that separates the purposeful tax evader -- or tax
19 undertaken with bad faith or evil intent or evil motive
19 violator, from the well-meaning, bUl sometimes confused,
20 and want of justification in view of all the fmancial
20 mass of innocent taxpayers.
21 circumstances of the taxpayers. Thats direct language
21
22 from- I have a copy of the opinion. but ofa '93 -- '73
22 Supreme Court said, and I think we kind of need to make
23 Supreme Court opinion. In our complex - this is the
23 this distinction because I perceive the government is
24 language that the Supreme Court says.
24 arguing that she is not in the mass -
25
The next par.1graph. In our complex tax system,
lc::'"J
25
Now, Mr. Murphy, that's pretty much what the
MR. MURPHY: That's correct. Judge, l don't
~.{=
659
660
THE COURT: But rm not sure it sounds good.
have an objection to that.

MR. BECRAFI": You w:mt to hear from me, Judge0
3 rm pleased with your willfulness ins1ructions.

4
THE COURT: I'm not even through yet. Well,
MR. BECRAFT: Okay. All right
THE COURT: That last phrase in that sentence
4 for mental attitude :md approach to the situation which
5 then to go to good faith defense, you're right. And then
5 the law required of her some action, and this is exactly
6 we start talking about good faith defense. There is one
6 what you wrote, but I think that's not what you meant.
7 thing on good faith defense we may need to add I noticed
8 something earlier. What I have done is rve taken the
8 says willfulness is negated by the defense of a good faith
MR. BECRAFT: Okay. Are we on the page that
9 defend:mt's and the government's, but the government,
9 mistake--
10 there was a little bit of stuff missing, so I put them
10
II together side-by-side. Willfulness is -- the fU"Sl part
11 the first one. Do you w:mt to say it that way? I mean
12 of the willfulness defense is from the defense, and that
12 that last little phrase just doesn't quite -- do you think
13 is just the intro on willfulness, is negated by the
13 it is okay?
THE COURT: Yes, it's good faith defense. It's
14 defense of a good faith mistake of the law requirements,
14
15 and I think thafs the more complete statement To make
15 problems, maybe we can strike it
MR. BECRAFT: Well, if it is causing some
16 such a determination, one must inquire into the
16
THE COURT: Which the law requires.
17 defend:mt's mind or mental attitudes and approach the
17
MR. BECRAFT: If you believe that the
18 situation which the law required of her. I may have this
18 defend:mt, subjectively in her own mind, believed that she
19 wrong, which the law required of her some actioo. That
!9 was not required by the law to file the tax returns in
20 doesn't look quite right. I will look it up here.
20 question, it will be your duty to fmd her not guilty. l'
21
21 that the line that the court is -
MR._
BECRAFI": Pemaps the court is reading too
22 closely, I don't see that there is a -
22
23
23 this second line of the sentence, and I had a lot of
THE COURT: This is exactly what you wrote
24 down.
25
THE COURT: What I'm having trouble with is
24 trouble before, :md I thought I would bring it up to you.

MR._
BECRAFI": Yes, sir.
25 It is, to make such a determination. you should must
661
662
inquire into the defend:mfs mind, her mental attitude and
2 approach to the situation which the law required of her
MR. MURPHY: They follow the law, I don't know
2 that mine would be a whole lot different
3 some act, :md I think that's okay. I just think it's kind
4 of-
4 to - I didn't want to change the defend:mfs language
THE COURT: Okay. Well, then I just wanted
MR. BECRAFI": Awkward.
5 without the defend:mt agreeing to it is the main thing.
THE COURT: - awkward. If you want it, I will
6 think we have got that changed now, I feel comfortable
7 leave it.
8
9
10
7 with it.
MR. BECRAFI": Okay, if the court will leave it,
ru live with it.

THE COURT: And approach the situation.
Then we go to what the government said, which
9 was a part of the Sand material, and then I go to the
10 defendanfs good faith, and we may want to try to change
II usually like my inslructions to sound good That's the
11 our font on that because I don't particularly like the way
12 problem I'm having. No offense. I would like to change
12 the font came out because there's a change in font. And
13 it and make it sound a little better, if we can. Her
13 then this is their repeated one. I wanted you to look at
14 mental attitude - let's just say this: Her approach to
14 this, Mr. Murphy. I was inclined to give something real
15 the situation which she believed the law required.
!5 close to it because the defense is entitled to something
16
MR._
17
THE COURT: Is that okay?
18
MR._
BECRAFT: That will be good, Judge.
BECRAFI": Yes, Your Honor. rm real
19 pleased with what the court has done.

20
THE COURT: Well. okay. Mr. Murphy, I think
!6 pretty close to it. If the defendant acted in good faith,

17 that is to say she actually believed the actions she took
18 were allowed by the law, then she is not guilty of the
19 offense of tax evasion or willfully failing to file income
20 tax retums. And it does not -- I think we're taking out
21 that's- tbafs all a part of the case.
21 the willfully failing because tbafs not - we don't want
22
22 to confuse the jury there. It does not matter whether the
MR._
MURPHY: Judge, rm stuek with that, I
23 don't think there's a lot I can do about it If! could
23 defend:mt was right or wrong in her beliefs, nor does it
24 write the jury instructions --
24 matter that her beliefs make sense or sound reasonable to
25
25 you, the jury. or to me, as the judge. The only thing
THE COURT: Well, we wouldn't --
I:
f:
663
664
that matters is whether or not the defendant actually

2 believed she was correct in her actions. Also, it is not
the defendanfs burden to prove that she did believe her
4 actions were correct, rather the government's burden to
TIIECOURT: rm a little concerned that we

2 don't have that burden language from the instruction, I
3 may switch and add that in. I will show you where. I
4 think I wilL Remember, the burden of establishing lack
prove that she did not. That's true. You staled that a
6 prosecution. A defendant is under no burden to prove her
7 burden. I may later on at some point modify that. It is
7 good faith, rather the prosecution must prove bad faith or
for you, the jury, to decide whether the government has
of good faith and criminal intent rests upon the
6 little differently than the Sand instruction, which is the
8 knowledge of falsity beyond a reasonahle doubt. We will
9 proved that the defendant willfully committed tax evasion
9 add that right there at that point. I think that's what
10 by proving beyond a reasonable doubt that she did not
10 we ought to do. Okay.
ll actually believe her actions were correct, and by proving
11
12 all the other elements that I have explained to you in
12 defendant is not presumed to know the law, that's true.
All right. The next one in this case, the
13 these instructioDS, or whether the defendant believed her
13
14 actions were proper. If you fmd that the government has
14 publications and word voluntarily. I think we better give
Government, this is the one on the IRS
15 failed to meet its burden, then you must fmd the
15 that, Mr. Murphy, there has been so much talk about
16 defendant not guilty of these offenses. If there's a
16 voluntary, I think I probably better give it.
17 reasonable doubt in your mind as of this issue, or even if
17
18 you conclude that the defendant could have only believed
18 took the Paperwork Reduction Act --
MR. MURPHY: Judge, I agree, and I know you
19 her actions were proper by abysmal ignorance and the
19
20 rankest kind of stupidity - and I think you're allowed to
20 it over there on G9, the next one over.
21 have language like that - yet you find that she believed
21
22 she was correct, you must find the defendant not guilty.
22 be given, and a third thing that should be given, I
23 Mr. Murphy, I mean there is a lot of cases that say that.
23 believe, based on the lestimony, the Seventh Circuit has
24
MR. MURPHY: Judge, I don't have an objection
25 to that.
TIIE COURT: Actually, I put a little piece of
MR. MURPHY: Yes, sir. And I think that should
24 taken up the question of whether wages are income several

25 times, and Judge Bower has said in a footnole in a case
666
665
Colabowski (spelled phonetically), that although not
2 raised in his brief, on appeal, the defense's entire case
at lrial rested on the claim to be in good faith belief
4 that wages are not income for taxation purposes. Whalever
his mental case, he, of course, was wrong, as all of us
perceive that as being particularly the defendant's

2 position.
MR. BECRAFf: It isn't, Your Honor.
THE COURT: But I think that because of the
5 evidence there might be some confusion on it. So what we
6 are already aware; nonetheless, the defendant still
6 will say is- rm going to add that where I have got
7 insists that no case holds that wages are income. Let us
7 the -- in this case, the defendant is presumed to - is
now that to resl, wages are income. Any reading of tax

9 cases by would be tax protesters should now preclude a
8 not preslDDed to know the law. I should -- I instruct you,

9 however, that the Jaw is that wages are income, I was
l 0 claim of good faith belief that wages or salaries are not
I 0 going to say, and must be included in gross income for
II taxable. I think we ought to have an instruction that
II purposes of income tax, and must be included in gross
12 wages are income for income tax purposes.
12 income wben determining income tax liability.
13
THE COURT: You're entided to something like
14 that. We had a gross income definition in the Tony Alamo
13
MR. MURPHY: Judge, I have no objection to
14 !haL
15 case. We usually give something like that. Nobody
15
MR. BECRAFf: Neither here, Your Honor.
16 submitted it, but I actually had one out to ask about. If
16
TIIE COURT: Okay. That will clear that up, and
17 you have got that written down, I would rather use one
17 that takes care of that. Okay. I've put that in the
18 that is written down.
18 earlier section, Ms. Wherry. And then we have got
19
MR. MURPHY: Judge, I don't have it written
19 inferring mental state. Obviously, this is all about
20 down, but I can write something down for you.
20 mental state, so rm just going to give the standard
21
THE COURT: Have you got the case right there?
21 instruction on inferring mental state. If nobody has any
22
22 objection, that will be just a sum up. I have got the
23
THE COURT: Wbydon'tyoujusthandMs. Wherry
23 summary. If you find that the government has proved
24 the case?
24 beyond a reasonable doubt each of the elements of the
25
25 offense as set out in these instructions, then as to the
rm going to put add wages are income. I don't
667
668
liability. This is a criminal case. The defendant is
count that you're considering, you must return a verdict

2 of guilty as to that count. If you find that the
2 charged uoder the law with the commission of a crime. and
3 government has not proved beyond a reasonable doubt each
3 the issue is whether the defendant has or has not- now,
4 of elements of the offense as set out in these
4 there's no- do I need - I thought there might be some
5 instructions, then as to the count that you're
5 proof on this, but there wasn't anything about her
6 considering, you must return a verdict of not guilty as to
6 settling any civil liability questions.
7 that count. That's to remind them that we have concluded
8 the discussion of the substantive questions.
8 It's one of those things that, you know, you kind of think
Then I caution you to -- it's just the nonnal
10 caution about they're only deciding this case, they're not
-~
---*
MR. BECRAFr: None. There wasn't, Your Honor.
9 about what jurors are going to think about, and that's the
10 only reason why I ever ask it. Well, gee, if we acquit
11 deciding any other case. They're here to determine the
11 her on a crime, she doesn't have to pay taxes.
12 guilt or innocence of the accused, not to return a verdict
12
l3 as to anybody else. I usually put that in just in case
13 didn't have any problem, it wa.' not an inappropriate
14 somebody is confused.
14 inquiiy and, obviously, everybody knows that there are
15
I also put the defendant's instruction in. You
THE COURT: Oh, I see what you're saying.
15 both civil and criminal aspects of the tax law, I think.
16 have no right to fmd the defendant guilty only for the
16
17 purpose of deterring others from committing crime. That's
17 that the Commissioner of Internal Revenue has the power to
18 certainly right, they have got to decide whether she
18 make a return and a.'5CSS a tax -- but I don't think we
I did include this: When you're instructed
19 committed this crime or not, not whether they were
19 need to do that now, do we?
20 concerned about somebody else not paying taxes when they
20
21 should pay.
21
THE COURT: We're going to strike that.
22
22
MR. MURPHY: I have no opposition to that,
I did include, again, a reference, because we
23 referenced civil liability earlier, so I included
23 Judge.
24 defendanrs D-30, there's a distinction between the civil
24
25 liability of a defendant and a defendant's criminal
25 unanimous, explain the verdict form and excuse our
THE COURT: And then the verdict has to be
669
670
alternate jurors, and then we have got a verdict form,
MR. MURPHY: Judge, I would rather not--
2 which just says Counts 1, 2, 3, 4, 5 and 6, and it has
3 guilty or not guilty. rll tell them about that. It has
3 ignorance in this case, it might be reversed.
4 got a copy of the indictment with all the prison ranges
MR. MURPHY: I don't disagree, Your Honor.
5 taken out, because that's not appropriate for a jury to
THE COURT: If you find a case that says to the
6 consider.
6 contrary, we might consider it, but otherwise...
All right. Gentlemen, ladies, have we-- any

objections to the instructions as revised?
MR. MURPHY: Judge, the only thing I'm
10 wondering, I wonder if, given the proof, if I would be
THE COURT: I think if I gave deliberate
All right. Let me ask you both, do you want to
8 come hack and start at 9:00 o'clock tomorrow and do your

9 closes at that time? I - that's perfectly okay, we don't
10 expect the jury to finish anyway, and irs- you know,
11 entitled to the deliberate ignorance instruction? I don't
11 about six minutes till 4:00.
12 know how that plays out --
12
13
THE COURT: No, no, I'm worried about that.
14
MR. MURPHY: I don't think that would fit in
15 with the good faith 16
THE COURT: Mixing that in with the good faith,
17 !think18
MR. MURPHY: I think I can :ugue a deliberate
MR. MURPHY: Judge, I think that's an
13 appropriate way to do things, go ahead and end for the

14 day.
15
MR. BECRAFT: I concur, Your Honor.
16
THE COURT: Okay. Well, then you have got your
17 sets of instruction. You can use the instructions in your

18 close. You can quote from the instructions. You can put
19 ignorance kind of aJgll!llent, that she ignored parts of the
19 something on the screen if we get a final one that's all
20 law.
20 clear for you, and we will probably have that for you a
21
THE COURT: Right. You can argue the
21 little before 9:00 o'clock tomorrow moming.
22 unreasonableness of her position in attacking whether she
22
23 actually had a good faith belief:
23 objections?
MR. BECRAFT: Judge, can I make some
24
24
THE COURT: Sure.
25
THE COURT: I-
25
MR. BECRAFT: You know, I presume this is kind
672
671
that and then have the inslruetim. I think tha(s always
of like a charge conference.

2
TIIE COURT: That's what we thought we were
MR. BECRAIT: Okay. Good enough. Then my only
2 better than having to split them up, that's just not -3 that's probably not the best way to do it. And I'm going
doing.
4 to tell you there's no way we could get the case to you
this evening so that you could begin your deliberations,
objections, Your Honor, I submitted, defense requested

6 instruction seven through nine that relate to the lesser
7 included offense, and we have dealt with that matter, I
TIIE COURT: I overruled the submittal and
9 go home early, and we will spend-- we will start at 9:00

10 o'clock tomorrow morning in here with the closing argument
I 0 concurred with the government.

II
7 you go home early, if that's all right. Anybody object?

8 All right. Without objection, then we're going to let you
think.
9
6 that would not be practical. So we have decided to let
MR. BECRAIT: That's all I have, Your Honor,
12 and rm pleased with the court's instructions.
II by Mr. Murphy and then. of course, defense counsel has a
12 chance to make a closing argument. Mr. Murphy has a short
13
THE COURT: Mr. Murphy, anything else liomyou?
13 rebuttal, if he wants to, and then we will have the
14
MR. MURPHY: No, Your Honor, I have no
14 inslruetions on the law.
15 objections to the court's instruction.

16
THE COURT: We're going to bring the jury in
15
Have a very pleasant evening. I want you to do
16 one thing, I want you to avoid anything in the newspaper
17 and let them go come back at 8:30 tomorrow, we will start
17 that might be about the case. If you happen to see
18 in here at 9:00 with closing argument and then final
18 anything, I want you to not pay any attention. And you
19 instructions inclusions on the law.
19 should let me know if you see something and you're
20
20 concerned at all that it might influence you. I want you
21
THE COURT: Ladies and gentlemen, we have had
21 to be careful to avoid that. Just don't read the paper
22 our charge conference, we've gone through all the
22 tomorrow. That's probably the best thing to do. You can
23 provisions of the law. Everybody agrees it would be
23 look at it when you go home tomorrow afternoon maybe,
24 better, becalL.., we cannot finish the arguments this
24 depending on whether you have concluded your determination
25 afternoon, to do them all tomorrow morning. We can do
25 in the case.
674
673
to have somebody stay around until they bring out the
Well, now, let's go back through everything.

2 Don't discuss the case among yourselves. Don't let
2 final version of the charge, you're welcome to do that.
3 anybody talk with you about it. You have heard all the
3 Of course, you're welcome to be excused and pick it up
4 evidence, but you have not heard the final arguments of
4 tomorrow, whichever you want to do is fme. I going to go
counsel, you have not heard the final instructions on the
5 back and fmish it up, and I'm sure we will get it
6 law, and you have not had a chance to go to the jury room
6 completed within the next 30 or 45 minutes, at the most.
7 and then have that discussion among yourselves. So you're
to keep an open mind until you have done all those things,
MR. BECRAIT: Your Honor, I will just read it
8 in the morning.
TIIE COURT: Whatever you wish to do. We will
9 then you're to begin that process in making up your minds
10 individually and then making up your mind as a jury.
10 make it available for you as soon as you like it. Thank
II
II you very much.
As you leave today and when you come tomorrow,
12 of course, avoid any contact with defense counsel or with
12
MR. BECRAFT: Have a good evening, Judge.
13 government counsel or with anybody associated with any
13
TIIECLERK: Allrise.
14 side in the case. If anybody tries to talk to you about
14
15 the case, report it promptly to one of our court security
15
16 officers or directly to me, we will take the appropriate
16
17 steps. Do not do any - make any inquiry or do not make
17
18 any -- do not do any research or make any investigation at
18
19 all, as you know, and, of course, avoid anything on
19
20 television., radio or TV that might be about this case or
20
21 cases like it Keep an open mind. We will see y'all
21
22 tomorrow at 9:00 o'clock. We should start right on time,
22
23 there shouldn't be any problem. We will see you then.
23
24
24
25
THE COURT: If you want to wait-- if you want
25
676
IN mE UNITED STATES DISTRICT COURT
APPEARANCES
FOR mE WESTERN DISTRICT OF TENNESSEE

WESTERN DMSION


Plaintiff,
VS.
NO. 03-20!11-MI
VERNICE KUGLIN,

209 LINCOLN STREET
HUNTSVILLE, ALABAMA 35801
Defendant.
I
rl

TRIAL PROCEEDINGS
BEFORE mE HONORABLE JON PHIPPS MCCALLA, RJDGE
AUGUST 7, 2003
VOLUME IV
BRENDA PARKER
OFFICIAL REPORTER
MEMPHIS, TENNESSEE 38!03
''
!
678
677
we're end at the end, it wouldn't make any difference
rn:URSDAY MORNING & AFTERNOON

AUGUST7,2003
2
3
The bial in this case resumed on this date,
3 number for identification only, not received?

MR. BECRAFT: Can I make one inquiry with the
5 where evidence was introduced and proceedings were had as
5 court? Will you give the instructions to the jury when
6 follows:
6 they go back to deliberate as well, a copy?
mECOURT: Yes,sir. Right.
mE CLERK: Exhibit 58.
mE COURT: My sheet is missing. Maybe I can
10
mE COURT: Everybody ready to proceed?
10 find it.
11
MR. MURPHY: The government is ready, Your
II
13
MR. BECRAFT: Your Honor, I think we have got
14 two quick matters to lalce care of. Yesterday, we had, I
That will be 59 for identification. 58 was the
12 1995 I 040 form instructions, so 59.

13
mE CLERK: ID.
14
mE COURT: ID only, four letters.

15 thought it was Exhibit 50, I don't know what the exhibit
15
16 number is, but he had the Code of Federal Regulations
16 Four Letters.)
17 book, and he substituted in lieu thereof some pages -
17
mE COURT: Anything else?
18
mE COURT: Right.
18
MR. MURPHY: Judge, you want us wearing the
19
MR. BECRAFT: Which the clerk has got. Second
19 mics this morning, the sound equipment?
20 point, I offered, but the court didn't admit those letters
20
21 from the lawyers, and I would like to make sure that
21 You know, we all think we can be heard easily, but it's
22 they're in the record I gave them to her.
22 not always - I know you're pretty easy to hear actually,
23
mE COURT: Okay. They will just be
I,
2 matter. It would just be Collective --what's the next
4 Thw:sday, August 7, 2003, at 9:00 o'clock a.m., when and
12 Honor.
I
I
mE COURT: I think it's probably a good idea.
23 Mr. Murphy, but I kind of have to get everybody to do the
24 collective, I think we have already got an A, I think it's
24 same thing.
25 B as submitted. We could give them ID numbers now that
25
CLOSING ARGUMENf BY MR. MURPHY

680
679
MR. MURPHY: Good morning, ladies and
COURT SECURITY OFFICER: Good morning, Your
2 Honor.
2 gentlemen.
THE JURY: Good morning.
4 Mr. Tuggle?
MR. MURPHY: We're at the end of the case as
COURT SECURITY OFFICER: Everybody is here.
5 fur as the terms of presentation of pmof. What we're
THE COURT: rve found if we let people pick
6 going to start with now is presentations of the argumeot,
THE COURT: Good morning. We got everybody,
7 and choose, people that need the mics don't want them.
All right Is everybody set'?
MR. MURPHY: The government is ready, Your
10 Honor.
THE COURT: Mr. Tuggle, we can bring everybody
11
7 and your real work will begin shortly when you go back
into the jury room and you make a decision regarding this
9 case.
10
11 service. I suspect nobody is looking forward to jury

12 service. !I lakes time out of everybody's schedule. It's
12 in.
13
{Jury in at9:02 am)
13 difficult. As busy as folks are today, it is difficult to
14
THE COURT: You may be seated. And, Mr.
14 accommodale in your schedules, but it's important because
15 Murphy, is the United Stales ready to proceed with closing
15 in the United Stlles, the people, ordinary people,
16 argument'?
16 ordinary citizens decide these cases, and the system
17
MR. MURPHY: The government is ready to
18 proceed, Your Honor.

19
THE COURT: You may proceed
17 doesn't function without you, so everybody thanks you for

18 it Weappreciateit
19
20 the question of taxes-- taxes is a pretty charged issue.
21
21 It goes without saying, taxes are always controversial.
22
22 Most folks would pmbably say they pay too much, but taxes
23
23 are part of the price we pay for living in the freest
24
24 wealthiest society in the world. And remember, this isn't
25
25 a case about whether taxes are good or bad; it's a case
CLOSING ARGUMENT BY MR. MURPHY

682
doubt that the defendant was employed by Federal Express
about whether the defendant evaded the taxes in this case.

2
Now, she's charged with six counts of income

tax evasion. There are three counts - there are three
4 elemeots to income tax evasion. That means there are

three things the government has to prove. The judge is
3 the present Now, the period we're dealing with in the

4 indictment is '96 through '97. The pmof in this case
5 showed wages from FedEx of a 183,000, 172,000,$168,000
6 172,000 in '99, 200,000- I mean 191,000 in 2000 and a
7 pmve an affmnative act of evasion. and I would submitiO
7 190,000 in 2001. You heard the tax computation. The
8 you, ladies and gentlemen, that based on the evidence in
8 taxable income is on this bottom line. For '96, it was
9 this case, that affu:mative act of evasion was the filing
9 162,000,147,000in'97,'98wasa 137,000,itwasa
10 of the false W-4 forms where the defendant claims she was
10 146,000 in '99, it was a 164,000 in 2000 and a 161,000 in
1 I exempt for the period of years throughout which the taxes
II 2001. The tax due and owing $47,000 in 1996,$42,000 in
12 were notlaken out of her check. The government has to
12 '97, $36,000 in '98, $41,000 in '99, $47,000 in 2000 and
13 prove beyond a reasonable doubt willfulness and, again,
13 $45,000 in 200 I, tax due and owing. I would submit the
14 the government- the judge will instruct you on that, but
14 government proved that beyond a reasonable doubt
15 that is the violation of a known legal duty. In this
15
16 case, the defendant has made a good faith defense, and the
16 case overall. In addition 10 being a pilot, the proof
I 7 government has to prove that the defendant did not act in
17 showed that the defendant, and Ibis is Exhibit 15, I would
Let's talk a little bit about the facts in the
18 good faith.
18 urge y'alliO look at it You can lake any of these
19
19 exhibits back in the courtroom you wish 10 lake back. But
Third, the government has 10 prove a tax
20 deficieocy, so that-- beyond a reasonable doubt Those
20 these are theW-2s. For 1998 or '88 rather, the defendant
21 are the three things we have got to prove. So let's start
21 claimed six exemptions. In 1990, she claimed ten.
22 with the tax deficiency, and let's talk about the case --
22
23 the fact< of the case as we go through.

The proof in this case established, I would
24
25 submit to you. ladies and gentlemen, beyond a rea.<onable
II
2 Corporation as a pilot from sometime in the 1980s up until
6 going to instruct you on this, but the government has to
Now, this is a case about taxes. Obviously,
20

681
.--:)
I would like to thank you for your jury
Now, the proof in this case was that the
23 defendant had one child, and if you look at the '92 tax
24 return, it was actually submitted in that case, she had-25 her child was the only dependent she claimed. She claimed
~----------~----------

683

684
10 exemptions, ladies and gentlemen.

2
Now, if you go fOIWard to 1996, 1995, that
inrerest income you had to have. '94, the IRS anyway, and
2 Ms. Kuglin knew about it, she didn't get a refund of all
3 period of time, the defendant begins to submit W-4 forms
3 her tax - all her taxes. And the IRS levied against all
4 where she cl:llms she is exempt from taxes. Now, she
4 of it. Now, does that square up? You don't get the tax
5 didn't file in '93, she didn't file in '94. The IRS took
5 money back. The IRS levies against you and you claim you
6 action against her in both yean; to collect that tax. She
6 don't have any tax liability and you got a refund, you're
7 admitted on the stand she didn't get a refund in '94, and
7 entitled to a refund. Well, that's not what the IRS said.
8 if you look - if you look at the forms - if you look at
and she had notice of a lot of this stuff. We've got the
9 all these forms, they basically say two important things
9 letters, we introduced approximately seven letlels
10 that you need to look at. I claim exemption from
10 beginning in '95. Also, her income, if you look at the
11 withholding for 1997, and I certify that I am both - that
11 proof was more than $650 in 1996, and if you-- I would
12 I meet both the following conditions. Last year, I had a
12 also urge you, ladies and gentlemen, to look at these
13 right to refund of all federal income tax withheld because
13 documents called the 1RP documents. For example, here is
14 I had no tax liability, and this year I expect a refund of
14 one for 2000. If you go to the back page of it, it shows
15 aU taxable income withheld because I have no tax
15 the amount of interest income she got in dividends in
16 liability.
16 every case. What you're going to see, if you look at
17
If you go to this top portion, if you look at
18 this first paragraph there, it says no, you cannot claim
17 those IRP documents, and those are Exhibits 3, 4, 5, 6, 7

18 and 8, I believe, if you look at those documents, you're
19 exemption from withholding if, one, your income exceeds
19 going to see that a lot of these years where the note on
20 $650 and includes unearned income, interest and dividends,
20 the W -4 said do not claim exempt if you have more than
21 and two, another person can claim you as a dependent on
21 $650 in income and received unearned income, i.e.
22 their tax return.
22 interest She had interest, she had more than $650 in
23
Now, beginning with the '99 W-4- and the
23 income and still she submitted the exempt certificate.
24 language on most of these is the same. In later yean;,
24 wruld submit, ladies and gentlemen -- and we're going to
25 they imposed a specific amount of unearned income,
25 talk some about the good faith defense - that that just

686

685
wasn't true, that was an act of evasion, that was an
2 untruth statement
Now, one other thing that is kind of
4 interesting about these W-4 forms, if you look at them,
you, ladies and gentlemen, that you have to acquit her,

2 but that belief has got to be good faith_ And I would
3 submit, ladies and gentlemen, this case turns on the
4 question of the defendant's good faith_
5 there's a statement down there that you have to sign,
6 under penalties of perjury, I certify that I am entitled
6 is- and this is part of it, this isn~ the whole
7 to the number of withholding allowances claimed on the
7 instruction - however, you may consider whether the
Now, the instruction the judge will give you
8 certificate or entitled to claim exempt status, and then
8 defendanfs belief was actually reasonable as a factor in
9 Ms. Kuglin, in every case but one, adds reserving all my
9 deciding whether she held thai belief in good faith. It
10 constitutional rights in this matter.
10 should also be pointed out that neither the defendanfs
11
Well, ladies and gentlemen, if you're entitled
12 to it, why not sign it under penalty of perjury. I mean
11 disagreement with the law, nor her own belief that the law
12 is unconstitutional, no maUer how earnestly that belief
13 if you're entitled to it and you think you're entitled to
13 is held. constitutes a defense of good faith. This case
14 it, and I would submit that that's an indication that she
14 turns on good faith.

Now, let's -- in talking about that, let's talk
15 didn't believe she was entitled to it, that she was trying
15
16 to limit her liability under that statement where she was
16 about credibility. The judge is going to instruct you
17 swearing under penalty of perjury that she was entitled to
17 about a-edibility. What credibility is, that's a lawyer's
18 those exemptions.
19
Now, let's talk-- we proved the acts of
18 way of saying you can deeide whether you're going --how

19 much of a petsOD's testimony you're going to believe, are
20 evasion, I would submit to you, ladies and gentlemen,
20 you going to believe all, are you going to none of it, are
21 beyond a reasonable doubt, and the proof establishes that.
21 you going to believe some of it As fact-fmders, you
22 Now, lefs talk a little about the good faith defense.
22 make that determination. In other words, is somebody
23 Under the good faith defense, if the defendant has a good
23 telling you the truth. And in this case, wa. this some
24 faith belief, in other words, she really believes that she
24 made-up deal to beat the tax system And the reason I put
25 wasn't violating the law, the judge is going to instruct
25 that question mark after good faith. thafs what this case

687

688
Supreme Court. the AI:kansas Supreme Court and the
turns on, her good faith.

2
Now, lees talk a little bit about the
2 Tennessee Supreme Court, which through her own testimony
3 defendant's contentions regarding the income tax that you
3 admitted that those were not - 1bat they were state court
4 heard yesterday when she was testifying on the stand. I
4 cases. not federal cases, and that they did not deal with
5 would submit the testimony you saw yesterday was the
the federal income tax Jaws. I would submit that that is
6 defendant claimed you can't tax ordinary occupations.
6 what the testimony was.

Now. ask yourself this: If you were going to
7 There's problems with the Paperwork Reduction Acl The
8 income tax is voluntary. There's no provision of the tax
8 take a trip from Memphis to, say. Los Angeles -- well.
9 law that imposes taxes on individuals, and there's
9 backing up a second. a lot of this - the law she quotes,
10 jurisdictional problems. That's more or less. I would
10 for example, if you look at Exhibit 40, tteaswy decisions
II submit, what the proof showed she claimed her basis was
II from 1916, Jack Cole case. 1960. The Internal Revenue
12 for not paying taxes and not filing returns. So the
12 investigation 19- Exhibit 28, 1953. Kind of out of
13 question then is did she have a good faith belief, and,
13 date, isn't it'? If you were going to take an automobile
14 ladies and gentlemen, again, if she doesn't have that good
14 trip from Memphis to Los Angeles and somebody came up
15 faith belief, I would submit the proof in this case - if
15 today and they had a 1918 map, what would you think?
16 you determine she didn't have a good faith belief, I would
16 Would you think that's reasonable? Now. is that -- was
17 submit that the proof in this case indicates and
17 that a good - does that constitute good faith? In her
18 establishes that she ought to be convicted.
18 own testimony, she had access to the Memphis State law
19
Now, what indicates she didn't have a good
19 library over there at the law school. All kinds of books
20 faith belief? Well, first of all, let's talk about the
20 over there. Does that constitute good faith? And you
21 age of some of those cases and where those cases were
21
22 from. She talked about the Pollock case from the 1800s.
22 to lose in this case? This is a defendant that over the
23 She talked about Brushaber which was a case prior to 1920.
23 six-year period encompassed in the indictment made over a
24 Prior to 1920, like 1914 or something, along those lines,
24 million dollars and paid $1300 in tax is all, when the tax
25 90 year-old case. She talked about cases from the Oregon
25 due and owing was over a quarter of a million dollars.
talk about credibility, does the defendant have anything

690

689
Does she have a reason not to be ttuthful to you, ladies
that -- is that emblematical of somebody who is sneaking
2 and gentlemen?
2 around ttying to bear the system? Does that constitute
3 good faith? Ask yourself about taking the money out of
Now, lees talk about the state cases. She
4 claims she relies on state cases. Ask yourself is that
4 the bank. We inttoduced the stuff from the bank. Pull
5 reasonable. She admitted. I would submit the testimony
5 out any statement and what you're going to see, I submit,
6 was, that those cases didn't deal with the income tax. If
6 ladies and gentlemen, if you examine it, is there's a
7 you get stopped for speeding in the State of Tennessee and
7 deposit from Federal Express to the defendant that same
8 the ttooper comes up and says, sir, ma'am, you were
8 day or at the next day, she goes and makes big cash
9 speeding. and you say, well, the speed limit is 80 miles
9 withdrawals, several thousand dollars. I would submit
I 0 an hour over there in Germany on the Autobahn or it's 80
10 1bat is emblematical or indicative of somebody who is
II miles an hour in Iowa, does that sound like a good faith
II ttying to beat the IRS out of tax money. Why do it - if
12 excuse? Think about it. Irs not - I would submit that
12 you have got a good faith belief, what have you got to
13 is not good faith, ladies and gentlemen.

14
13 worry about? And, again, if you have a good faith belief
The W-4s, let's talk about that. Now, ifMs.
14 that you're exempt, why not just sign the W-4 that you
15 Kuglin really believed that she wasn' subject to tax, why
15 certify under penalty ofpeijury that you're entitled to
16 not pay your tax and contest it? You heard -- I would
16 it? Why not just sign it? Why add all this language
17 submit the proof was Ms. Kuglin testified yesterday that
17 about reserving all my constitutional rights. If it is
18 she has never filed a refund for all this tax money she
18 the ttuth, just sign it, what do you have to be worried
I 9 has paid in the past years. She flied for 25 years, at
19 about?
20 least tax returns, but she has never filed a refund. She
20
21 claims to really believe this, but she hasn't filed a
21 so -- you know, I would submit, based on a lot of this
The defendant talked about the fact that -- and
22 refund. Does that sound like something that somebody that
22 stuff, that first issue of rm not subject 1o a tax on
23 good faith believed this was ttue would do.
23 occupations, look at the age of the cases. Look at what
24
TheW-4s, is that ttue? Ask yourself that.
24 they're talking about.
25 would submit does that constitute good faith or does
25
128
Now, let's talk about voluntariness. We
~-

691

692
introduced several exhibits like the '95 and '93 1040, and
doesn't support her position, none of that. But a lot of
2 the defendant talked about using some of this material in
2 what she claims to be the law, there's stuff in the very
3 arriving at her conclusions regarding the income tax,
3 material that she used that disputes that fuct. She is
4 but -- that it didn't apply to her.
4 tiptoeing through the tulips, ladies and gentlemen. If it
Judge, my mic is falling apart. !may blow
5 helps me, rm going to pick it. If it doesn't help me,
6 everybody out of their chairs. If you look -- go through
6 rm going to disregard that. Taxes are voluntary. She
7 these books, the highlighted portions, it's clear there's
7 got on the wilness stand and told you, I would submit,
language about penalties, and, you know, she talked

9 about -- she talked about the OMB issues. But you want to
8 ladies and gentlemen, that there was no provision in the

9 law that required payment of the income tax. I asked her
lO know something, the same section that they talk about the
!0 are you familiar with Section l of Internal Revenue Code.
ll OMB issues in here, they talk about penalties for not
II tax imposed? She turns to it in her book, said that she
12 fliing. And there's also language in these books that
!2 had been - knew about this section for years. Section
l3 indicate if you have a certain amount of income, you have
!3 one, the fust section of the Internal Revenue Code,
14 to file.
14 unmarried individuals other than surviving spouses and
15
Now, one thing that is striking about the
!5 heads of household, there is hereby imposed on the taxable
16 defendant's claimed study of the law, remember the old
16 income of every individual, other than the surviving
17 song by Tiny Tim, Tiptoe through the Tulips, you have to
17 spouse as defined in Section 2A or the head of a household
18 be a little older to remember that. Tiptoe through the
!8 as defmed in Section 2B l who is not a married individual
19 tulips with the garden with me. Well, she tiptoed through
!9 a tax determined in accordance with the following table.
20 the tulips. Stuff that helps her support her argument,
20
21 and I would submit it doesn't support her argument Boy,
21 that and say in good faith, well, rm not required to pay
22 she can talk all about it, tell you all about that stuff,
22 tax. And we went through all those other code provisions
Now, ladies and gentlemen, could anybody read
23 tell you about a !914 case, a 1916 Treasury Department
23 yesterday, which she admitted she read that says shall
24 decision, tell you all about that. Now, doesn't know
24 make returns, all that sort of language, y'all remember
25 anything about the modern Jaw, hasn't read anything that
25 that. Now, how could you read that stuff and say I'm not
CLOSING ARGUMENT BY MR MURPHY

694
CWSING ARGUMENT BY MR. MURPHY

693
older, I have bOuble reading things close up, 1.6012-l,
required to pay. lin not required to file?

2
You heard her talk about some of the materials
2 it reads basically that except as provided in paragraph -
3 she used. Now, a lot of those materials were not
3 in subparagraph two of this paragraph, an income tax
4 government materials and, specifically, there was
4 retum must be filed by every individual before the
5 testimony about IRS code words, that wasn't government,
5 taxable year beginning January l, 1973 during which you
6 and you ought to ask yourself, does a reasonable person
6 received $600 or more of gross income and for each taxable
7 say shall doesn't mean shall, is that reasonable?
7 year beginning after December 31st of 1972, during which
The OMB argument, you know, the Paperworlc
8 you receive $750 if such individual is a citizen of the
9 Reduction Act wasn't complied with. A couple of things
9 United States. And her testimony, I would submit, ladies
10 about that. There's an OMB number on all these tax forms.
!0 and gentlemen, that she was a citizen of the United
II Its right up here, it is highlighted, it's 1545-0074.
II States. Her testimony was also that she knew about this
12 Now, Ms. Knglin's claim, I would submit, that the evidence
12 regulatory provision. She had known about it for several
13 has established is that the OMB - the OMB requirement
!3 years.
14 hasn't been complied with and she can't determine what tax
14
15 form she is supposed to use. Okay. Now, this is somebody
!5 return, Form l 040 is preseribed for general use in making
16 that was able to go out and find an Internal Revenue
!6 the return required under this paragraph. Form l 040A is
If you flip over further, this says forms of
17 cumulative bulletin from 1985. This is the one for the
17 an optional short form, which in accordance with paragraph
!8 first half of the year. She can find that, find cases
!8 A7 of this section may be used by certain taxpayers. This
19 from 1890s, !914 or '13, can fmd Treasury Department
!9 says you have got to file a l 040, but under the
20 decisions from 19!6, but in this index, well, I don't find
20 defendants explanation, somebody that has something to
21 the reference to the l 040 form. Well, if you go over, if
21 lose and has had time to concoct all this stuff, who
22 you - if you look at that IIUIIlber on the l 040 form, it's
22 selectively reads the IRS code, I would submit that the
23 all up - in and out throughout this whole list Okay.
23 defendant whose testimony was I can't find anything in the
24 Its right there. We circled it. And that code provision
24 code that says I have got to file a tax return or pay.
25 or this regulation, Exhibit 56, I can tell I'm getting
25 Her testimony is I know about it, but, you know, shall

696

695
doesn't mean shall. Isn't it odd that you can find
2 something like that? She can find something like this,
stopped for speeding, for example, and you ask the

2 officer-- he gives you a ticket and you say. well, I
3 but she can't find anything that disagrees with her
3 don't think I should have gotten the ticket, do you think
4 position. And I would submit to you, ladies and
4 you have got an obligation not to go to court that day or
5 gentlemen, it was beeause she was selective. It wasn't
5 go to the court appearance on that basis? Is that
6 because she really believed it, it was beeause she was
6 reasonable? I would submit it's not. And that's really
7 selective. It was beeause she didn't like paying the tax.

She disagrees with the law. she doesn't really have a good
9 faith belief. However, you may consider whether the
7 what- well, I wrote the IRS these letters, and look at

8 the letter, there's one letter, the only issue -9 initially what she raised was that OMB argument. She got
10 defendanrs good faith belief was actually- was aetually
10 asked, how about cases that dealt with the OMB issue.
11 reasonable as a factor in deciding whether she held that
11 Well, I-- I don't know anything about those, don't know
12 belief in good faith. Is this stuff actually reasonable?
12 anything about 1989 cases and, again, this is a woman that
13 Ask yourself that. Remember, this case IUms on good
13 can get up there and tell you about -- about a 258
14 faith. Ask yourself that
14 Supreme -- page Supreme Court decision in the Pollock
15
15 case, but can't tell you -- who flies planes
Now, one other thing, we're not dealing with an
16 uneducated person here. We're dealing with somebody who
16 internationally for FedEx, makes well over a hundred
17 has got a pilot's license, that flies with FedEx. that is
17 thousand dollars a year, but she doesn't know anything
18 a big income earner.
18 about any of these cases later on that might hurt her
19
19 position. Is that reasonable? Is that believable? Is
The defendant claims she didn't believe she had
20 to file a return. Well, the IRS, I would submit the proof
20 that aedible? That is for you, ladies and gentlemen. to
21 was, sure believed she did and kept sending her notices,
21 decide, but I would submit that based on this evidence,
22 send her notice after notice, and those were introduced
22 it's not.
23 into evidence. She admined she got them. Where is your
23
24 1040? She claims she lried to get answers from the IRS.
24 penalties for failure to file. We asked her about that
25 We11, ladies and gentlemen, here is the thing: Ifyou get
25 from the code. Oh, yes, I know about that It goes back

697

698
defendant got up there, she has made the good faith
to the same thing, I'm not somebody liable for the tax.
2 Well, Section one, you didn't hear her testifY intlirectly
You heard testimony. She knew that there were
2 defense, the burden is on the government to rerut that
3 about Section one, did you? Because that cuts the legs
3 defense. to prove beyond a
4 out from under her argument.
4 didn't believe it in good faith. but if you look at her
You heard the testimony from Mr. Scobey, and
~easonable
doubt that she
5 own testimony, look at her own testimony, what she
6 that was short testimony, but I would submit it was
6 testified to on cross, I would submit that establishes she
7 significant, and here is why. If you're not doing
7 didn't have a good faith belief. Look at the other things
8 anything wrong, what do you care whether somebody you have
8 she has done, like the false W -4s. like that little deal
9 a business relationship with cooperates with the IRS in an
9 with reservation of all my constitutional rights where she
10 investigation. What do you care? I'm not doing anything
10 is supposed to certify it's true, slripping the money out
11 wrong, haven't done anything wrong, I really believe this
11 of the bank. those are indicative of attempt to evade.
12 stuff. or if you really didn't believe it, if it was a11 a
12 The fact that she had an opportunity to sit down with the
13 come on, if really what was going on was you disagreed
13 IRS and talk about, I would submit the proof was, her
14 with the tax law. ask yourself would you not want the IRS
14 taxes, not somebody else's, not some general kind of,
15 talking to somebody you had a business relationship with.
15 well, why does the code apply to me, but her taxes, ladies
16 I would submit. ladies and gentlemen, that common sense
16 and gentlemen, her situation, what she owed the IRS, what
17 indicates you wouldn't
17 she was required to file. She had that opportunity, she
18
Ladies and gentlemen, I have probably talked
18 didn't do it. I would submit there's a reason why.
In closing. ladies and gentlemen, I would
19 too long now. Thank you for your participation in this
19
20 case. Thank you for listening to the evidence and rhe
20 submit that the government has established beyond a
21 lawyers.
21 reasonable doubt that the defendant evaded income taxes as
22
In closing, I would like to say to you, ladies
22 charged in the indictment, and I would ask you. ladies and
23 and gentlemen, I submit that if you consider the proof in
23 gendemen, based on that proof to return a verdict of
24 this case, all the proof, you're going to come to the
24 guilty as to all six couuts of the indictment. Thank you,
25 conclusion - and remember you don't - the fact that the
25 ladies and gentlemen.
CLOSING ARGUMENr BY MR. BECRAFT

700
699
TilE COURT: Does the defense wish to give a

2 closing argument?
MR. BECRAFf: Yes, Your Honor.
MR. BECRAFT: May it please the court, ladies

2 and gentlemen of the jury, you were picked, we went
3 through a jury selection process
011
Monday, you had a
4 bunch of questions asked of you, the lawyers got together
5 and we made a selection of the potential-- of the jurors
6 that would sit down and try this case. I have watched you
7 over the last several days, and irs clear to me, and I
know it's clear to Ms. Kuglin, I know irs clear to Ms.
9 White, and I know it's clear to Mr. Murphy, and I know
10
I 0 that Judge McCalla knows that this is the case that each
II
11 and every one of you have been attentive. You have
12
12 listened and you have diligently discharged the obligation
13
13 of being a juror. Being a juror is real important for
14
14 justice to be meted out here in America. Be it a civil
15
15 case or a criminal case, tbese controversies that we have
16
16 in our society are resolved only because people such as
17
17 yourselves, the people of a community acknowledge that we
18
18 have to have a way of resolving our controversies here in
19
19 America and they have a willingness to come in and decide
20
20 disputed cases such as tins one.
21
21
22
22 everybody on Ibis side of tbe courtroom from tbe court on
And let me just tell you, ladies and gentlemen,
23
23 down, we want to thank you for the service that you have
24
24 given in this case. As Judge McCalla-- and there is no
25
25 doubt -- there can be no doubt that this is a criminal
CLOSING ARGUMENT BY MR. BECRAFT

701
CLOSING ARGUMENr BY MR. BECRAFT

702
case, and tbe way we try criminal cases here in America is

2 they are a little bit different from a civil case. You
reasonable doubt is a doubt based 011 reason and common

2 sense, and a lot of people really understand that in a
3 know, we got- picture in your mind, if you will, that
3 criminal case, the government has got to prove their case
4 the lady, tbe lady ofjustice that holds the scales, the
4 beyond a reasonable doubt, but there is a real important
5 balances. Well, the system of justice here in America
5 concept that I want you to remember, and it has direct
6 says that in a civil case, the party that prevails is the
6 application to this case. Judge McCalla is going to tell
7 one that has tbe preponder.mce of the evidence which is
7 you that that doubt is tbe doubt that you would have when
8 the way it goes. Whose weighty evidence weighs just a
8 you're considering the most important affairs of your
9 little bit more than the otber side? If it tips and
9 life.
10 balances this way in a civil case, that's tbe way you make
10
II your decision, except here in America, in criminal cases,
II have got to look at the situation and conclude that what
12 we have a different standard, if you will. In criminal
12 are some of the most important affairs of people's lives.
Now, you have got to be- that means that you
13 cases, we require that the government prove its case
13 Well, you know, buying a car is an important affair.
14 beyond a reasonable doubt. Now, I want to tell you a
14 Getting a job is an important affair. Buying a house is
15 little bit about reasonable doubt, give you some of the
15 an important affair. Getting married. But may I suggest
16 tbings tbat I tbinlc are important
16 to you what it takes, what is pedlaps the most important
17
17 affuir in a party's life. Let me give you an example. We
You know, after all tbese lawyers sit down, tbe
18 court is going to give you some instructions, and I really
18 all have children, or most of us, and may I suggest to you
19 think that it i.< going to be beneficial, and I have no
19 that important affairs are sometbing lilce this: Suppose
20 doubt that you will do this, but the court is going to
20 your child is injured, is in tbe hospital and you have got
21 read off tbese instructions right here, and he's going to
21 to go down to that hospital and make certain decisions.
22 tell you tbe various tbings that you must consider in a
22 You make a decision is an arm cut off, do you make a
23 case such as this one.
23 decision to cut off an arm that has to be amputated. I
24
Now, one of the points that he will cover with
25 you is this concept of reasonable doubt. Now, a
24 suggest to you that that is the caliber oftbings that are

25 most important in life. What if a child -what if you
lk;

703

704
chart right here. Did you see Vernie Kuglin get up and
have to make a decision about whether a child lives or

2 dies. That, ladies and gentlemen, those types of matters
3 are the most impor1ant in life. And so in this situation,
3 we have any questions when Ms. White got up and said,
4 what you have to do is you have to look at the totality of
4 well, gee, this is what she owed? No, ladies and
5 the evidence, weigh it, consider the burden that the
5 gentlemen, that is not really a disputed element of fact
6 government has, must carry and make a determination. This
6 in this case.
7 is one of those most important affairs of your life. Just

like making a decision for a child, and you have got to
Let me tell you about the second element in
8 this case. The second element that the defendant
9 weigh this case and determine has reasonable doubt been
9 committed an affu:mative act constituting tax evasion or
10 proven in this most impor1ant affair in the life ofVernie
10 attempted tax evasion. Well, to a degree, that is a
11 Kuglin.
Now, what is it that the government must prove?
12
2 object when FedEx came in and said how much she made? Did
11 disputed element, but what I want to discuss with you now

12 that I have this closing opportunity to kind of hit our
13 Well, the court has permitted me to tell you a few things
13 side of the case, is I want to discuss this last bottom
14 in advance of what the court is going to tell you. Now,
14 issue here, that the defendant acted willfully, meaning
15 perhaps this is a little light, I will try to improve it.
15 Vernie Kuglin as to eaeh count acted willfully.
16 I have a copy here, I hope that you can see this good.
16
17 Now, in criminal cases-- you know, this is a tax evasion
17 you know, he has lbe right to do that, you know, he pulled
Well, moments ago, Mr. Murphy got up here and,
18 case, as I told you in opening, lawyers can kind of
18 out an excerpt from the jwy insttuctions and -- you know,
19 catalog, courts kind of catalog things, and we call them
19 he pointed out, he kind of focused in on what the
20 elements. But what elements are, are facts. In order to
20 government thinks is impor1ant. Well, let me kind of put
21 fmd Vernie Kuglin guilty of Count 1 orCount6, the
21 the whole thing into context and not just pull out a
22 government has got to go through for each count and prove
22 little part. What the court will be telling you about
23 vety specific facts. The [liSt fact that must be proven
23 this defense of good faith is this: If the defendant
24 is a tax deficiency. Well, ladies and gentlemen, let's go
24 acted in good faith. that is to say she actually believed
25 through this case, we didn't have any objections to this
25 the actions she took were allowable by law, then she is

706

705
are certain points of law that do support what she has
not guilty of lbe offense of tax evasion. It does not

2 matter whelber the defendant was right or wrong in her
2 done. First and foremost, she has the right to rely on
3 beliefs, nor does it matter if her beliefs make sense,
3 government documents. Doesn't it make sense that that is
4 sound reasonable to you, the jury, or to me, as the judge.
4 the law? I mean if you read something from the

government, shouldn't you be entitled to consider-- to
5 The only thing that matters is whether or not the

6 defendant actually believed she was correct in her
6 rely upon what the government has to say and even act upon
7 actions. That, ladies and gentlemen, that's the stmdard
7 it, and then when the government comes along and says, oh,
8 there for willfulness. Willfulness means, in essence, you
8 you have done something wrong, are you to be deprived of
9 got to know, V ernie Kuglin has got to know she was
9 saying, well, the government said this? No, that is a
10 required to file an income tax return. She has got to
10 vety reasonable, it's an acceptable defense.

Now, there's even another aspect of the defense
11 know that she had to pay income taxes, and with knowledge
11
12 of that duty, she deliberately and maliciously with evil
12 that we're asserting in this case is the species of this
13 intent, no, I'm not going to do that. What the government
13 overall good faith defense is this: The court will tell
14 has done here with this illustration, that excerpt out of
14 you that V ernie Kuglin is not presumed to know the law,
15 the jury insttuctions, is this: He has focused in on a
15 meaning that, as she sits here clolbed with the
16 point that we don't deny, that you can consider the
16 presumption of innocence, as she sits here, you know, you
17 reasonableness of the defendant's belief in making a
17 got to look at her, well, the law - she really doesn't
18 determination as to whether or not she actually believed
18 have any knowledge of the law, but she engaged in times in
19 them.
19 the fast, starting off in 1992 with this presumption that
20
Well, we have some vety, vety specific defenses
20 she didn't know anything about the law, we know that
21 that have been asserted in this case, and the judge will
21 starting in 1992, she started a study of the law.
22 be telling you about it, but I think to need to in advance
22
23 tell you about them right now. We contend Ms. Kuglin did
23 entirely reasonable. You can rely upon what you read in
24 not act willfully, that she does, in fact, have a good
24 the law and you can rely on what the governmc:nt document'
25 failb defense. And the reason why we say that is there
25 have to say. Now, that, ladies and gentlemc:n, reliance on
Now, that study of the law, I think, is
:.:--'

707

708
those government documents as well as, you know, don't

2 presume some other aspect of the law and clothe her with
appreciate, just from our own knowledge, common knowledge

2 that this is just the beginning, that there are manuals,
3 that presumption that she knows such. The ooly thing she
3 there are books, that there is everything else in the
4 can really know is what she told you about in this
4 world dealing with this incredibly complex law.
courtroom.
Now, I want to -- I want to go, if I can, to
7 the particular.; of her specific arguments. One was this

argument about liability. Is this some concocted,
9 something drawn out of the air argument? Well, !just
Now, Ms. Kuglin has this question, as does
6 every other American, what law requires her to do

7 something. Well, that's what is talked about in the
8 Privacy Act. And here we know for a fact that the

9 government, the IRS complies with the Privacy Act, because
10 happened to grab real quick Exhibit Number 36, which
lO in this Exhibit Number 36, there's a Privacy Act
ll incidently is the 1975 federal income tax form. You know,
ll notification. What does the IRS itself say about the laws
12 the front and the back of a Form l 040 instruction booklet
12 that require someone to submit a return? Let me kind of
13 that belongs to her, but Ms. Kuglin., you know, she
13 blow this up a little bit.
MR. MURPHY: Judge, can we approach for a
14 testified during her testimony that she was reading,
14
15 she- you know, she came to some knowledge, some
15 minute?
16 appreciation of this thing known as the Privacy Act, and
16
THECOURT: Youmay.
l 7 to her, you know, ber belief about the Privacy Act is
17
18 this: Ifs a-- it sounds like irs a reasonable law if
18 bench.)
MR. MURPHY: Judge, I hate to interrupt defense
19 it doesn't exist, but she thinks that it does exist.
19
20 Government agencies should tell people what laws requires
20 counsel's closing, but he's arguing the Jaw. rm not
21 them to do something, particularly if it is submit
21 hearing what Ms. Kuglin believed. He's arguing about what
22 information.
22 the Jaw is. I don't think he can get do that.
Now, ladies and gentlemen, look at this big
23
23
MR. BECRAFT: I was just getting ready to get
24 thick thing. Nobody disputes this is the Intemal Revenue
24 into a very specific exhibit.
25 Code. And don't you know-- I think we can all
25
THE COURT: I'm going to tell them what the law

710
709
is. I think that's probably what we need to do.
and 60 II of their regulations.
MR. BECRAFT: Can I take care of it, Judge?
MR. MURPHY: Sure, sure.
3 according to Ms. Kuglin, are the two Jaws that require her
MR. BECRAFT: I will do it.
4 to file a return. Did we not have in this case, I
Now, we know that from this document what,
5 think-- Mr. Murphy, correct me ifl'm wrong, but I think

6 that Mr. Murphy and Ms. Kuglin were yesterday afternoon
6 court.)
7
THE COURT: Wait just a second. Thank you.
MR. BECRAFT: You know, I started off in this
9 case, and I said, I think I did in opening, and we did it
7 engaged in reading of the code. And I recall that the

8 words that both of them spoke on that occasion were
9 something to this effect, that the Jaw - these two Jaws
I 0 when Ms. Kuglin was on the stand, I want to restate it
lO right here or their beliefs about the Jaw, you know, it
II right now, you know, we started off this case, and the
11 applies to persons liable just like that statement says,
12 court said -- told y'all that what the witnesses say and
12 those who are liable for tax. Now,let's step into Vernie
13 what the lawyers say is not the Jaw, and what I'm telling
13 Kuglin's mind. She engaged in this study and she did not
14 you right now is really the facts and beliefs about the
14 find that when she looked at the Jaws that require the
15 Jaw. But don't take- you know, if you were- if! slip
15 submission of returns, it didn't say something like, you
16 up, like Ms. Kuglin did and say, oh, this is the Jaw,
16 know, everybody making so much money is required to file a
I 7 you're to get the law from the court rather than me,
17 return. If you use these terms of art, I think the exact
18 you're to get the facts from her.
18 testimony she gave, terms of art every person liable, and
19
Now, that having been said, Jet me get back to
19 that prompted her to engage in a study of the code, and
20 what the government said in this particular exhibit. Look
20 she went through here and, sure, she used this index, she
21 down there, it says --page two, bonom left-hand
21 pulled out this book that she got in 1994, she told you
22 corner-- the Internal Revenue Code requires every person
22 she studied the index, and she looked at the section of
23 liable for any tax imposed by the code to make a return or
23 the index that said liability for tax, and she starts
24 statement according to the forms and regulations
24 looking at all these other taxes and sees provisions in
25 prescribed by the Internal Revenue Service, Sectioo 600 I
25 the Internal Revenue Code, if you do something here, you

712

711
know, you're liable for the tax or, you know, there's
2 other sections making someone liable, and so Vernie Kuglin
are liable, and the only section I find is - the only

2 section that I find of someone being liable is this
3 comes to the position, that, you know, I need to fmd the
3 nonresident aliens or foreign COlpOtations.
4 sections of the code, the Internal Revenue Code in
5 reference to the income tax whereas Congress has used the
5 shows that she didn't believe that. Now, we do have--
6 words somebody is liable for a tax. Because V ernie Kuglin
6 the government wants to try to make a big point about
Now, there's nothing in this evidence that
7 said you're only required to file a return if you are
7 these letters coming from the government. You know, we
8 liable. And so she sits down and she takes that index,
8 have got one letter here, if I can go ahead and address it
9 finds one section that makes somebody liable for the
9 that the moment- we have got this letter here in October
I 0 filing of or makes somebody liable for the federal income
I 0 of 1995 when Ms. Kuglin got around to asking the
II tax. nonresident aliens and foreign cOlpOtations. Now,
II government some-- asking the government some question.,.
12 there wasn't any testimony that - I didn't bear it, the
12 Let me go ahead and flip it up on the screen. This is the
13 government bad the opportunity to prove one other section
13 first letter that she wrote to the IRS. It is Ex.hibit 41.
14 of the oode what makes someone liable, that didn't happen.
14 It is dated October 18th, 1995. It sets forth some
15 And also, Ms. Kuglin, my recollection is, that during an
15 positions down here, and let me just tell you, you read
16 exchange with the government on cross examination, Ms.
16 these parts of this letter right here, you can see that
I 7 Kuglin said, well, you know, I engaged in a search, a
17 Ms. Kuglin didn't invent anything about this Paperwork
18 computer search for the word liable in the income fax
18 Reduction Act argument. You know, she is mentioning 0067.
I 9 sections of the code and I still only came up with that
19 You know, she is mentioning the Paperwork Reduction Act
20 one section.
20 She is mentioning individual income tax 1.1-1, she knows
Now,ladies and gentlemen, what we have right
21
21 about this stuff. But what Ms. Kuglin did is she didn't
22 here is a fundamental problem. You know, V ernie Kuglin,
22 invent something here. We know that, you know, this
23 presumed not to know anything about the law, starts her
23 document right here shows that the IRS received this
24 studies by '93 and '94 and '95, and she has reached the
24 letter, IRS, P. 0. Box-- I can't read it, Memphis,
25 conclusion filing returns applies to those parties that
25 Tennessee. It was received November 13th, 1995, the IRS

714

713
lHE COURT: Ladies and gentlemen, there's some
got this letter. It asks simple questions. I want to

2 know, says Ms. Kuglin, the statutes and implementing
2 subjects that are very sensitive in our society. One is a
3 regulations that require me to file a return, the stallltes

4 and implementing regulations which specifically designate
reference to religion. It is inappropriate for an

4 attorney on any side to refer to a deity and to make
5 the exact tax for which I am liable. You know, I think

6 here in America, American people have the right to ask the
comparisons with any other entity in a negative or

6 positive way. We're here to decide this case on the facts
7 government questions. You know, to say the American
7 and the evidence and the law. I'm going to ask you to
8 people cannot --you know, I think even the Bible says you
8 disregard the COIIllllents by counsel about God and the IRS.
9 can ask God questions. And I don't think that the IRS is
9 I say that in appropriate respect to our separation of
I 0 greater than God. And I think it's perfectly logieal -
10 powers of the First Amendment. You shouldn't consider
II that at all.
12
THE COURT: You may.
12
13
13
But it just makes sense that American people
II
14 bench.)
15
MR. MURPHY: Judge, rm going to object. This
14 ought to have the right to ask questions of government.

15
Now, the prosecution's position is that once
16 is an improper argument That stuff about the IRS isn't
16 Ms. Kuglin asked these questions, about a month later --
I 7 greater than God, he's just --
17 take a look at exlnbit number -
18
MR. BECRAFT: Okay, I won't do it again.
18
lHE CLERK: Is your microphone on?
19
MR. MURPHY: He's appealing to the prejudices
19
MR.BECRAFT: No,it'snot. Iturnediton
20 of the jury.
21
THE COURT: I think it is an appeal to
22 prejudice. I'm going to tell the jury it is an appeal to

23 prejudice and they have to disregard it.
24
25 court.)
(fhe following proceedings were bad in open
20 now. Take a look at Ex.hibit Number 42. Ob, that other

21 exhibit was October 18th of'95; this is-- what does it
22 say? November 25th of'95. Here again, Ms. Kuglin is

23 asking questions. I don't think we need to necessarily
24 look at them all right now, but, again, I direct your
25 attention to the second page, compare the questions she
CLOSING ARGUMENT BY MR. BECRAIT

715

716
asked on the first exhibit and look at this one, and she
2 is again asking the same questions. I think this one has
1HE COURT: 1bat's beyond the scope of the

2 proof in the case. Objection has to be sustained.
3 a couple of more questions that are being asked. Well,
4 the government wants you to think that someone --
4 gentlemen, is that you can examine those letters, and they
5 certainly has the right to ask questions - was -
5 do not constitute a reply to the questions ofVernie
MR. BECRAFT: The point I make, ladies and
6 received a reply by means of this series of letters here
6 Kuglin. 1bat happened back in 1995, and this controversy
7 from the IRS. You know, I guess if you ask a question of
7 has rolled on and Ms. Kuglin has gone through '96, '97,
8 govennnent and you get some paperwork back from them again
8 '98, '99, 2000,2001,2002, maybe up throughout this trial
9 and it doesn't answer your questions, the government's
9 without having received a reply from the government And
10 suggestion is that you're under some type of requirement
10 to say that in a situation like this that an American is
II to fold, you know, you don't need to insist any more that
II culpable, criminally culpable, that you have acted with an
12 you get an answer to your question. Yet, Vernie Kuglin's
12 evil intent, that you really didn't believe these things
13 questions are critica.lly important. Right or wrong, she
13 and you acted willfully just simply does not match the
14 has the right to try to ask questions of government and
14 facts of this case.
15 insist on an answer.
15
16
16 The government mentions some of these -- the age of some
Now, examine-- you know, I don't know all the
Let me move on to a couple of other documents.
17 exhibit numbers right here, but they're sitting right up
17 of these cases, these documents that are used. You know,
18 here, and those letters that you got back, does the IRS
18 the government casts aspersions upon a statement by a
19 answer a single question she posed? In November of 1995,
19 government official appearing in Exhibit 28, Mr. Dwight
20 there was the opportunity for the government to come
20 A vis, making a statement. You see where my finger is?
21 along, the IRS to come along and answer those questions,
21 Let me point this out to you now. Your income tax is one
22 and if that had happened, ladies and gentlemen, may I
22 hundred percent voluntary tax and your liquor tax is one
23 suggest--
23 hundred percent enforced tax. Now, ladies and gentlemen,
24
MR. MURPHY: Judge, Judge, he's speculating
25 now, and I submit he can't do lhaL
24 words, words, something like this, you present to an

25 ordinary American like her, an airline pilot, and it has a

717

718
certain meaning, and Americans are not presumed, she is

2 not presumed lo Jcnow the law, but you can't presume what
comes from the government that had an impact upon her

2 belief: And there's -- its age doesn't mean anything. II
3 she - what type of conclusion she is supposed to reach
3 is offered lo prove that she believed what the government
4 from lhaL You know, the government makes much of the
4 had ID say. Read the document here. It is talking about
5 :fuel that she's a pilot. Well, she is nol a lawyer,
5 nonresident aliens filing Form 1040.
6 ladies and gentlemen. Well, rm a lawyer. There's no way
7 I can climb into, I guess, a 757 and push down that
7 roll into alibis stage the Paperworlc Reduction Act
Ms. Kuglin wenl a step funher. Let me kind of
8 lhrollle and take off out here at the airport. I don't
8 argument. Lets take a look at a document right here thai
9 think we need lo compare V ernie Kuglin to a lawyer.
9 she found very, very important. Look at this, this is
10 think we need to take into consideration what the :fucts
10 Form 2555, il is named foreign earned income, and il has
II are, that she is a pilot trying lo learn a lillie bit
11 this OMB control number up here, you can take this back lo
12 about the law. So, you know, V ernie Kuglin has told us
12 the jury room and look at it. Now, take a look at this
13 that this statement here has some significance for her.
13 and ask yourself a question, can someone, fran government
14 She has told us that, you know --and we're nol saying,
14 documents, reach a conclusion different from a lot of
15 and I don't think the evidence supports this proposition
15 people? Well, I suggestio you that thai is nol only
16 that V ernie Kuglin was down there al Memphis Stale, down
16 possible, it did here in this situation. Vernie Kuglin,
17 there at the law library on Cenlral spending oodles of
17 having a copy of the Internal Revenue Code, knows what
18 time going through those books. She told us that what she
18 Section 1 of the Internal Revenue Code deals with. There
19 was doing was she was getting references from cases from
19 could be no question about that, because thai was a matter
20 the things thai she read. She was talking lo people and
20 that Mr. Murphy covered with her specifically that read
21 fmding documents, and while I don't think that there was
21 from the code. What Ms. Kuglin was intrigued by is
22 any specific testimony about-- you know, she did read
22 something entirely different. She fo=d that it seems
23 this document here Treasury Decision 2313, she read it
23 only logical to her-- and see this number right here,
24 before April of2000- April of 1996. But, you know,
24 this 1.1-1? You know, that'snol an invention on the part
25 il's a document that she did read. It is a document that
25 of Ms. Kuglin, because I think that she is especially

720

719
wrong, that's not really the issue in this case. The
stating it-- rm going to refer back to Exhibit Number41

2 right here, correct me if! am wrong, but I see that this
2 question is did she believe it, right or wrong, :md if she
3 document says, flat out, it's talking about Form 2555,
3 believed it, it's your obligation to conclude that she did
4 foreign earned income, and she is talking about 1.1-1, :md
4 not act with that criminal state of mind, which is
5 this is no invention on her part because she mentions it
5 essential for you to convict her on any count in the
6 in a letter to the IRS dated October I 8th of 1995. So to
6 indictment.
I want to move on to - I think I have covered
7 explain to you, the jury, how she reached these
8 conclusions, we offer an official government document
8 a lot of the points that need to be covered here, but
9 Now, there wasn't :my testimony that Ms. Kuglin acquired
9 there's one final thing that I need to point out to you.
I 0 this document in any other way th:m what she has already
10 You know, Ms. Kuglin said she is a member of the
II told you, people tell her things. She checks it out :md
II Libertari:m party. I think it is kind of common knowledge
12 goes :md gets information. She knows - she said we had a
12 that the Libertarians, they believe in the rights--
13 little- we were wondering about how to express it in
13
14 clear language for the benefit of the jury yesterday, but
14 counsel's comment.
MR. MURPHY: Judge, fm going to object to
15 I think I asked a question, you know, I used the leml
15
MR. BECRAFT: I will withdraw that.
16 implementing regulations, but Ms. Kuglin, I think she
16
lHE COURT: I think that is outside the proof.
17 concludes, she said this is the regulation that matches
17 We know she is a member, but that's about it.
18 :md supports Section 1 of the Intemal Revenue Code. And
18
I 9 to her, the document that is required to be filed in
19 the totality of what she -- who she is, that she is
20 reference to meeting the requirements of Seetion I of the
20 someone that really is conmtilted to this proposition, you
21 Internal Revenue Code is this document that has that 0067
21 know, I -- how many of us have sal down and listened to a
22 OMB control number on there, which is Form 2555.

23
Now, that's odd, people. Irs real odd. But
MR. BECRAFT: There can no doubt, once you take
22 tape series on the Constitution, Democracy in America,

23 Common Sense, Text of the Constitution, Bill ofRights?
24 the question I w:mt to present to you is, where is it
24 think we all know what the Bill of Rights does is it
25 shown that Vernie Kuglin did not believe that'? Right or
25 protects rights. We have got a lady here that listened to

722

721
1 tapes on the Bill of Rights. Is it something that you
for with reference to powers of taxation. She told you
2 denigrate her for, for trying to protect rights? Well,
2 about the old - the history of the taxing provisions of
3 this gets back around to the most fundamental question in
3 the United States Constitution. She told you about that
4 this case. The most fimdamental question in this case
4 Pollock case. She told you about the 16th Amendment. She
centers upon what Ms. Kuglin learned regarding the - you
5 told you about the Brushaber case. The Brushaber case
6 know, the nature of the federal inoome tax here in
6 says, oh, in a constitutional sense, the federal income
7 Tennessee. She read this case, Jack Cole against
7 tax is an excise tax.
McFarl:md, it had a direct relationship to her beliefs
Now, ladies and gentlemen, I think when a court
9 about the federal income tax. You know, she testified
9 is talking about, you know, constitutional things, those
I 0 that she believed that the federal income tax was an
10 are kind of permanent, and, you know, the mere fact that
I 1 excise tax. Is that something that is concocted out of
11 long ago in legal history there was this case before 1920
12 thin aU'? I would suggest to you it is not conoocted out
12 that described in a constitutional sense the federal
13 of thin air, and the reasoo for that is that if you take a
13 income tax as being an excise tax, I don't suggest that
14 look at Exhibit Number 17, which is the 1995 Form W -4, you
14 its ages makes it irrelevant like the government does. I
15 will look through this documents, and one of the cases
15 would suggest that the age of a case is indicative of its
16 that she talked about in her testimony was this Brushaber
16 wisdom.
17 case, an exhibit, document provided to her employer,
17
18 nobody doubts it was signed, you know, 12-30 of'95. The
18 Kuglin found real important, Jack Cole versus McFarland,
Let me talk about this one case here that M.
19 attachments, the exhibits that are attached to this
19 here you can see it on the screen, it is Exhibit Number
20 document, it says there, it says Brushaber versus Union
20 35. I merely direct your attention to what I - what
21 Pacific. Read the sentence bere. It says taxation of
21 appears to be a very important point made by the Tennessee
22 income is in its nature an excise case. Right there.
22 Supreme Court in 1960. Realizing and receiving income or
23 Brushaber, Union Pacific, an excise. That's what V ernie
23 earnings is not a privilege that c:m be taxed Now, when
24 Kuglin believes. She deseribed for you about her beliefs
24 you're dealing with constitutional questions, as Ms.
25 about what the Constitution of the United States provides
25 Kuglin did, you know, it-- it just seems natural that you

723

724
would accept without question, well, the Supreme Court of
question to the government, what makes me liable for the
2 the United States says it's an excise tax, and it just
2 federal income tax. She did a computer search looking for
3 seems so natural for someone to have the United States
3 the word liable or tried to find a statute liable. Well,
4 Supreme Court- I mean the Tennessee Supreme Court say an

excise tax, can't be used to tax - or you have a natural
4 the only thing that you can swmise from all of this is
5 that, well, gee, the law appears lo - or at least her
6 right of receiving and realizing income, and cannot an
6 belief is that the law appears to impose a requirement on
7 American like her read these documents? She is not a
7 people who are liable, and then just kind of have this
lawyer that's going lo go down and do Ions and tons of
Section 6012 dangling out here and having no connection to
9 research. She is going 1o read these basic things and
9 being made liable. Now, that's-- that's V ernie Knglin's
10 reach certain conclusions. Is she not entitled 1o rely on
10 beliefs.
11 these documents? I would suggest that she is.
12
Now, one final point that I think I need to
Now, she is a pilot. She is not a tax law
11
12 professor. She is not a lawyer. She has just simply
13 address right here is Mr. Murphy brought in- he held up
13 honestly sat down and examined the tax laws, found some
14 a big thick book yesterday. He pointed out in his
14 conflicting things. She has read certain information that
15 azguments in closing, he points to this Section 56 -- I
15 reaches her - that causes her to reach certain
16 mean Exhibit 56, 1.6012-1, you know, which I guess the
16 conclusions, and the government hasn't really established
17 jury probably knows enough about this to detennine that
17 any type of a case that she did not believe these things.
18 this is an income tax regulation. Look at it from Ms.
18
19 Kuglin's viewpoint. She looked at these provisions of the
19 indications from the government or suggestions that all of
20 code. She has looked at these things like this, and what
20 this stuff was recently invented, which is simply not the
21 she is looking for is what makes me liable. I want to see
21 case, because the very documents that have been offered
22 where Congress has made me liable. Congress knows how lo
22 into evidence show that she was talking about this stuff
23 make someone liable. They did so with that Section 1461,
23 before the years covered by the indictment. Irs not an
24 according to her beliefs. Nonresident aliens and foreign
24 invention. The totality of this case is this: Vemie
25 corpor.ltions. She is looking for one -- that was her
25 Knglin does her studying. In the fall of '95, she writes
In closing ;uguments, there has been

726

725
1 two letters to the IRS. I think they're Exhibits 41 and
2 42, get them and read them, poses the questions to the
MR. BECRAFf: rm going to tell the jury that

2 the jury is the fourth branch of government that makes the
3 IRS, what statute makes me liable, and gets no direct
3 decisions in criminal case --
4 answer. Presume her to be wrong, is being wrong criminal?
MR. BERNHOFT: Basic civics.
And I want to get back to what I did when I had my opening
MR. BECRAFr: It's not a nullification
6 statement up here, I just want to grab this and throw this
6 argument, YourHonor.
7 down one more time. Tax evasion is not committed by
MR. MURPHY: Oh, yes, it is. Judge.
8 reading the law and relying on the government This is
MR. BECRAFf: rm going to say you represent
9 good fuith.
9 the judiciary, he represents the executive branch. that
10
Ladies and gentlemen. that right there is the
10 code is the worl< product of Congress, but there is a
11 reason why I contend that V ernie Kuglin is not guilty of
11 fourth branch of government, it's them.
12 tax evasion.
12
13
Now, I want to address one final point that
14 relates to your duties as jurors. You know, we're all
THE COURT: There's not a fourth branch of the
13 government. If there is, it's not the jury. The jury is

14 part of the judicial system, so they're part of the- if
15 familiar with the fact that in America, we have got three
15 they're part of any branch, they probably- they're part
16 branches of government. May I make a suggest that the
16 of the third branch.
17 bulb of the matter is that there are four brnnches of
17
18 government"
18 branch.
MR. BECRAIT: I won't call them the fourth
19
19
20
THE COURT: You may.
20 media, if we wanted to talk about sort of- have a
21
22 bench.)
23
MR. MURPHY: Judge, it sounds like we're
THE COURT: The fourth brnnch is the press and
21 discussion about how things worl<, but the jury is part -
22 I will tell them right now if you want me to, they're part
23 of the function of the judicial branch. I think thafs
24 heading into a nullification argument, and I object that
24 right.
25 there are not four branches of government, there's three.
25
MR. BECRAFT: I won't get inlo that, Judge, and

728

727
have a seat until they come out.
I won't labellbem a brnnch of government. What rm

2 leading up to is what their function is. They're going to
(Jwy in at 10:46 a.m.)
3 take this contested case.
TilE COURT: You may be sealed. Mr. Becraf~
TilE COURT: They're part of the functioning of
4 you may proceed.
the judicial branch in administering the law. I mean

6 they're paid by lbe judicial branch. They're drawn by the
MR. BECRAFT: May it please the court, ladies

6 and gentlemen, rve just about wrapped everything up.
7 judicial branch. I mean they are part of the judicial
7 rve got a few concluding remari<s. you know. in a
8 branch.
8 criminal case here in America. what we do is - and I
MR. BECRAFT: rm not unaware. I was
10 colloquially expressing them as being the fourth br:mcb of

11 government.
TilE COURT: I think - I think it is an area
12
13 that we best avoid.

14
MR. BECRAFT: Olcay.
15
11 burden, in closing arguments, this is the structure, lbe

12 government gets to open, the defense gets up to give its
13 say, and then there is-- what's left over is the rebuttal
14 argument that the government can make. In a few moments,
15 Mr. Murphy is going to get up here and address some of the
16 things that I said, but please remember that I won't have
16 court.)
17
9 talked about that burden that is imposed upon the

10 government. Well, to enable the government to meet its
THE COURT: We're going to take a restroom
17 any opportunity to get up here and engage in surrebuttal
18 break, and it will be - we're going to take our 15-minute
18 and point out some of the things that he points out to you
19 break at this time. When we come back, we will conclude
19 in a few moments. I simply ask something of you, you
20 the argument from defense counsel, we will have a short
20 know-
21 rebuttal argument, and then we will have the instructions.
21
22 Thank you.
22 All the jury has got to be asked to do is follow the law.
23
(Recess taken at 10:30 until 10:45 a.m.)
23
24
THE COURT: Bring the jury in.
24 ask is that they think about what the counter position has
25
They should be here in just a second. You can
25 been. I think that's all you're going to say, is that
about the fuels, and what you do when you come back into
right, Mr. Becraft?

2
MR. BECRAFT: You anticipated where I was
3 going, Your Honor.

4
TilE COURT: I have been here before, and that's
5 a pretty -- we ought to let you make that argumen~ so I
TilE COURT: Well, I think the normal thing to

730

729
2 this jury room is to tell us what your collective judgment

3 is.
4
And I w:mt to make this one fmal comment about
5 what you do when you exercise this activity of
6 understand the reason for lbe objection, but I think we
6 deliberations in trying to reach that collective judgment,
7 have resolved it by lhe discu..sion.
7 please consider lhe facts. Please consider that lhe
MR. MURPHY: Judge, Judge, rm going to object.
MR. BECRAFT: When you get back lhere in that
8 government has lhe burden of proving beyond a reasonable
9 jwy room, let me tell you when Mr. Kuglin's presumption
9 doubt Please consider that lbe decision that you make is
10 of innocence will leave. You know, during atrial, lbe
10 one of the most important that you make in your life, and
11 parties can look at the jurors, and you don't know what is
11 it is lhe most important you're making in lhe life of
12 going through lheir minds, maybe somebody is accepting our
12 Vemice Kuglin. So when you get back lhere, please
13 position, maybe somebody is not accepting oor position.
13 consider the evidence.
14 You know, it's obvious that jurors in any type of case,
14
15 and particularly a criminal case, there's going to be
15 talce into consideration the facts that support our side of
16 differences of opinion, :md you may have certain leanings
16 the case. Here in America, our criminal justice system is
17 at this stage one way or lhe other, I don't know what lhey
17 dependent upon us bringing in 12 people to try the true
If you hear something from Mr. Murphy, also
18 are, but I think that's a fair statement to make. What
18 members of our comnunity :md to decide disputed facts.
19 will happen from this point forward is that after he gets
19 There are disputed fuels in this case. But I would
20 the rebuttal and after the court gives you the applicable
20 suggest to you that once you weigh those disputed facts,
21 jury instructions in this case, which since I mentioned
21 take into consideration lhe old scales ofjustice, take
22 it, I do want to tell you. please listen very closely,
22 into consideration lhe govemmenfs burden of proof beyond
23 once you go back in that jury room, then what you will be
23 a reasonable doubt And consider it as lbe most important
24 about is making a collective judgment, 12 of you will get
24 thing that you do in your life. When you take that into
25 together and you'll express your opinions, you'll talk
25 consideration and consider all the facts in this case,
~----------------------------------------------~~------------------------------------------------

731
REBUITAL ARGUMENT BY MR. MURPHY

732
!here is but one conclusion that can be reached, Vernie
MR. MURPHY: Thank you. Your Honor.
2 Kuglin did not willfully commit tax evasion for lbe years
3 '%, '97, '98, '99, 2000 and 2001, and lbe only fair and
3 allowed a brief period of time for rebuttal. We get back
4 just venlict to return in this case is not guilty on all
4 to lbe same !bing. This case rums on lbe good failb
5 of !hose counts. Thank you, ladies and gentlemen.

6
TilE COURT: Mr. Murphy.
Ladies and gentlemen, at this point, I'm
defense and what constitures good failb.

6
Now,just a couple oflbings. In !he proof
7 yesterday, Ms. Kuglin said she went to lbe Memphis State
9 are several important lbings, lbe Jack Cole case. irs in
library, law library, had access to all Ibis stuff. There
10
lO evidence, you can read it I urge you to look lbrough it.
ll
ll see if !here's one mention of !he federal income tax code.
12
12 You're going to- the judge is going to tell you that you
13
13 can rely on lbe decisions of lbe U. S. Supreme Court.
14
14 This is not a United States Supreme Court case. This is
15
15 another example of tiptoeing lbrough the tulips. This
16
16 helps her. Look at all this material she submitted on
17
17 voluntariness, you're going to see references in !here,
18
18 and in every case lbe collection efforts, enforcement
19
19 efforts, she goes in and she picks out a sentence and
20
20 takes it out of context, tiptoeing lbrough the tulips.
21
21
22
22 requirements about paying the tax, filing returns. They
The form books we put in, look there. They got
23
23 talk about penalties, tiptoeing lbrough lbe tulips, the
24
24 stuff about lbe OMB, you know, I was reading it for that,
25
25 not this other stuff She ignores anylbing !hat

733

734
know, Mr. Becraft makes this lady !hat's an airline pilot
undermines her argument. Now, we're not claiming that

2 this wa.< recently invented. She has been doing this for
2 sound like some kind of innocent --she is not a lawyer,
3 years. What our position is, ladies and gentlemen, is
3 she is not a lawyer. Well, look at !hose letters.
4 !hat it is not in good failb. Ask yourself, a good failb
4 There's a jillion legal citations in there, ladies and
belief, what is it based on? No federal cases olberthan
gentlemen. You know, she knows enough law to say -- to
6 lbatFloracasepriortomaybe 1914. Just because a case
6 form a belief that she doesn't have to fJ.!e because of lbe
7 is old doesn't make it wise. That just means it is an old
7 problem wilh lbe OMB number, but !here's an OMB number on
8 case. Didn't do any recent research, evidently. But now
8 lbe 1040, and it's in !hat list she talks about. What is
9 she knows lbe tax code, and the defendant stood up here
9 kind of interesting about lbe list is here is anolber
10 and told you about her belief that she couldn't find
I 0 example of tiptoeing lbrough !he tulips. You go to the
II anylbing !hat required her to file a I 040 or file a tax
11 list, she goes to the first one, and she says I don't-- I
12 return or pay tax. Well, section one, which she admitted
12 don't see the number. Well, that number for lbe
!3 she knew of years ago was aware of it, says, according to
13 individual tax income return, lbe I 040, irs on this whole
14 her testimony,lbere is hereby imposed on lbe taxable
14 list all over lbe place. And this doesn't say citation of
15 income of every individual a tax determined in accordance
15 lbe tax code up here. It says 26 CFR part of section, not
16 wilb lbe following table. Tiptoe lbrough lbe tulips,
16 tax code, not United States Code, CFR. Tiptoe lbrough the
17 ignore !hat You got a copy of 26 Code of Federal
17 tulips. Well, you know, I read this. Is this good failb?
!8 Regulations 601-21-1, individuals required to make return
18 Does this sound like good failb? I would submit it is
19 of income. She knew about this f<r several years. This
19 not, ladies and gentlemen.
20 document says you got to make a return on a 1040 if you
20
21 have more than certain income. Tiptoe lbrough lbe tulips,
21 Look at all these letters she got ftom lbe IRS. Now, how
22 this doesn't apply to her.
22 could you say in good failb !hat after you got alllhese
23
Now, is it reasonable to believe that she
One olber !bing, and I'm going to sit down.
23 letters !hat I didn't believe, you know, I had to file?
24 concluded she didn't have to pay income tax or file income
24 After they're levying against you. If she believed this
25 tax returns? Look at the letters !hey submitted. You
25 in good failb, why the bogu.< W-4s, why did she never a.sk
REBUTfAL ARGUMENT BY MR. MURPHY

735
thi section? Oh, it doesn't appear to me. The section
for a return of the prior taxes? That was the defendanes

2 testimony. She ha-' never asked for a refund of those tax
2 that says you shall pay your tax, it doesn't apply to me.
3 monies. Never. Now, if you believe it in good faith, why
3 What about this section where it says you shall make a
4 not, why wouldn't you want to do thai'? Why would you
4 return? Well, it doesn't apply to me because shall
slrip the money out of your bank account every payday? I
5 doesn't mean shall. Does that sound reasonable?
6 submit you do that because you know you violated the law
7 and you know that the IRS is going to come after your
7 the defendant's position is so ridiculous that it can't
8 money. This case turns on your estimation of the good
I would submit that based on the evidence that
constitute a reasooable position. And you can determine
9 faith. I would submit, ladies and gentlemen, that there
9 the reasonableness of it in making your judgment about
I 0 isn't good faith. They can't have it both ways. She
10 good faith.
II can't be an airline pilot that makes -- that in six years
ll
12 has made over a million dollars, in six years has beat the
12 now, but I submit that if you go back in that jury room
Ladies and gentlemen, I'm going to sit down
13 government out of$259,507.64 in income tax, but she's an
13 and you look at all the evidence and you consider her
14 idiot when it comes to the law. The question is not
14 position that yru're going to come to the conclusion that
15 whether she was a lawyer, but did she have good faith, and
15 this was a scheme to evade tax. that she didn't like
16 what you saw through her testimony, and we can -- the
16 paying tax. she didn't like the way the code was written
17 government can rely on her testimony in order to meet its
17 and that she is guilty of each count of this indictment.
18 burden of proof beyond a reasonable doubt was somebody who
18 Thank you, ladies and gentlemen.
19 selectively ignored things that hurt her position, that
19
20 undermined her position. Tiptoe through the tulips. If
20
21 it helps me, if it is a 1916 decision that helps me, I
21
22 found it, that's the law. If it is the code, if it is the
22
23 instruction booklet, the most basic thing that hurts me,
23
24 well, no, I didn't know about that or it doesn't apply to
24
25 me. It is like a dog chasing its tail. Well, what about
25
JURY INSlRUCTIONS
JURY INSlRUCTIONS
738
737
lHE COURT: Now, ladies and gentlemen, it is

2 now my duty to instruct you on the law that applies in
2 proving the defendant guilty beyond a reasonable doubt as

3 to each charge in the indictment, and if it fails to do
4 and begin your discussions, what we call your
4 so, you must find the defendant not guilty of the charge
5 that you are considering.

While the government's burden of proof is a
6 of these statements, so you won't really need to take any
7 notes now. You will have all of the materials in front of
7 strict or heavy burden, it is not necessary that a

8 defendant's guilt be proved beyond all possible doubt. It
8 you.
9
It will be your duty to decide whether the
I 0 government has proved beyond a reasonable doubt the
9 is only required that the governments proof exclude any

10 reasonable doubt concerning a defendant's guilt.
A reasonable doubt is a real doubt based upon
11 specific facts necessary to fmd the defendant guilty of
11
12 the crimes charged in the indictment You must make your
12 reason and common sense after careful and impartial
13 decision only on the basis of the testimony and other
13 consideration of all of the evidence in !be=
14 evidence presented here during the !rial. and you must not
14
15 be influenced in any way by either sympathy or prejudice
15 proof of such a convincing character that you would be
16 for or again$! the defendant or the government.

17
You must also follow the law as I explain it to
18 you whether you agree with that law or not, and you must
Proof beyond a reasonable doubt. therefore, is
16 willing to rely and act upon it without hesitation in the

17 most important of your own affairs. If you are convinced
18 that the defendant has been proved guilty beyond a
19 follow all of my instructions as a whole. You may not
19 reasonable doubt. say so. If you are not convinced. say
20 single out or disregard any of the coures instructions on
20 so.
21 thelaw.
21
22
22 evidence that I have admitted in the case. The term
The indictment or formal charge against the
23 defendant is not evidence of guilt Indeed, the defendant
~--
any evidence at all. The government has the burden of
3 this case. When I fmish, you will go to the jury room
delibcrntions. Of course, you're going to have a full set
I
I
I
REBUTfAL ARGUMENT BY MR. MURPHY

736
As staled earlier, you must consider only the
23 evidence includes the testimony of the witnesses, the
24 is presmned by the law to be innocent. The law does not
24 exhibits admitted in the record and any facts of which the
25 require the defendant lo prove her innocence or produce
25 court has taken judicial notice. Remember, that anything
-----t-111"r-------
flJRY INSTRUCf!ONS
flJRY INSTRUCTIONS
739
740
the lawyers say is not evidence in the case. It is yow-
for each one, for each charge. You must decide whether
2 only recollection and interpretation of the evidence that
2 the government has presented proof beyond a reasonable
3 conlrols. What the Iawy= say is not binding upon yoiL
3 doubt that the defendant is guilty of thai particular
In considering the evidence, you may make
4 charge.
5 deductions and reach conclusions which reason and common
6 sense lead you to make, and you should not be concerned
6 whether it is guilty or not guilty, you should not be
7 about whether the evidence is direct or circumstantial.

Direct evidence is the testimony of one who asserts actual
In reaching yow- decision on one charge,
7 influenced by yow- decision on any of the other charges.
You are instructed that the court has taken
9 knowledge of a fact, such as an eyewitness.
9 judicial notice of the fact that Memphis. Shelby County,
10 Circumstantial evidence is proof of a chain of facts and
10 Tennessee is located in the Western Disttict of Tennessee.
I I circumstances indicating thai the defendant is either
ll Since you are the fact- finders in this case, you may, but
12 guilty or not guilty. The law makes no distinction
12 you are not required to accept even this fact as
13 between the weight that you may give to either direct or
13 conclusively established.
14 circumstantial evidence.
14
15
15 the evidence, I do not mean that you must accept all of
Also, you should not assume from anything that
16 I may have said or done thai! have any opinion concerning
Now, in saying thai you must consider all of
16 the evidence as true or accura1e. You should decide
17 any of the issues in this case. Except for my
17 whether you believe what each witness had to say and how
18 instructions to you, you should disregard anything that I
18 important thai testimony was. In making that decision,
l 9 have said in amving at your own decision concerning the
19 you may believe or disbelieve any witness in whole or in
20 facts.
20 part. Also, the number of witnesses testifying concerning
21
The defendant has been charged with six crimes.
21 any particular dispute is not conlrolling. You may decide
22 The number of charges is no evidence of guil~ and this
22 thai the testimony of a smaller number of witnesses
23 should not influence you in your deeision in any way. It
23 concerning any fact in dispute is more believable than the
24 is your duty to separately consider the evidence that
24 testimony of a larger nmnber of witnesses to the contrary.
25 relates to each chazge and to return a separate verdict
25
flJRY INSTRUCTIONS
In deciding whether you believe or do not
flJRY INSTRUCTIONS
741
742
believe any witness, I suggest thai you ask your.;elf a few
memory or an intentional falsehood, and that may depend on
2 questions. Did the petSOD impress you as one who was
2 whether it has to do with an important fact or with only
3 telling the truth? Did the witness have a particular
3 an unimportant detail.
4 reason not to tell the truth? Did the witness have a
5 personal interest in the outcome of the case? Did the
5 talked with you about the eredibility or believability of
6 witness seem to have a good memory? Did the witness have
6 the witnesses, and I suggested some things for you to
7 the opportunity and ability to observe accuralely the
7 consider in evaluating each witness' testimony.
You have heard the defendant testifY. I just
8 things the witness testified about? Did the witness
9 appear to understand the questioos clearly and answer them
9 evaluating the defendant's testimony.
10 directly? Did the witness' testimony differ from the
10
11 testimony of other witnesses?
11 officials. The fact that a witness may be employed by the
12
You should also ask your.;elf whether there was
13 evidence tending to prove thai the witness testified
You should consider the same things in
You have heard the testimony of law enforcement
12 government as a law enforcement official does not mean

13 that his or her testimony is necessarily deserving of more
14 falsely concerning some important fact or whether there
14 or less consideratioo or greater or lesser weight than
15 was evidence thai at some other time the witness said or
15 thai of an ordinary witness.
16 did something or failed to say or do something which was
16
17 different from the testimony the witness gave before you
17 evidence whether to accept the testimony of the law
18 during the ttial.

19
You should keep in mind. of cour.;e, thai a
It is your decision after reviewing all of the
18 enforcement witnesses and to give to that testimony

19 whatever wei~ if any, thai you find thai it deserves.
20 simple mistake by a witness does not necessarily mean thai
20
21 the witness was not telling the truth as the witness
21 initiated through an indictment. An indictment is but a
22 remembers
i~
because people naiUially tend to forget some
23 things or remember other things inaccurately. So if a
I told you at the outset that this case was
22 formal method of accusing a defendant of a crime. It
23 includes the government's theory of the case, and rm
24 witness has made a misstatem~ you need to consider
24 going to read the entire indictment again to you in just a
25 whether thai misstatement was simply an innocent lapse of
25 moment The indictment is not evidence of any kind
JURY INSTRUcriONS
JURY INSTRUCfiONS
744
743
against an accused.
2
income in the sum of approximately $147,999.60, that well
The defendant has pled not guilty to the

charges pled in the indiclment. This plea puts in issue
4 each of the essential elements of the offenses as
2 knowing and believing the foregoing facts, the defendant

3 on or about April 15, 1998, in the Western District of
4 Tennessee, did willfully attempt to evade and defeat the
5 described in these instructions and imposes upon the
5 said income tax due and owing by her to the United States
6 government the burden of establishing each of these
6 of America for said calendar year, by failing to make an
7 elements by proof beyond a reasonable doubt
7 income tax return on or before April 15, 1998, as required
I'm going to read to you the indicbnent at this

9 time. Of course, you will have the indicbnent along with
10 the instructions with you in the jury room.
ll
Count l. That during the calendar year, 1996,
by law, to any proper officer of the Internal Revenue

9 Service, by failing to pay the Internal Revenue Service
lO said income tax and by filing a false Form W -4 in 1997, in
ll violation of Title 26, United States Code. Section 7201.
12 the defendant V ernice B. Kuglin, had and received taxable
12
l3 income in the sum of approximately $162,883.75. that well
13 the defendant, Vem ice B. Kuglin, had and received taxable
14 income in the sum of approximately $137,197.93, that while
Count 3. That during the calendar year 1998,
15 onoraboutAprill5, 1995, intheWesternDistrictof
16 on oraboutApril15, 1999, in the Western District of
18 of America for said calendar year by failing 1o make an
19 income tax return on or before Aprill5, 1997, as required
19 of America for said calendar year by failing to make an
20 by law, to any proper officer of the Internal Revenue
21 Service and by failing to pay the Internal Revenue Service
22 the said income tax, in violation of Title 26, United
22 Service. by failing to pay the Internal Revenue Service
23 States Code, Section 7201.
23 said income tax and by filing a false Form W -4 in 1998, in
24
Count2. That during the calendar year, 1997,
25 the defendant, Vernice B. Kuglin, had and received taxable
24 violation of Title 26, United States Code, Section 720 I.

25
Count4. That during thecalendaryear 1999,
JURY INSTRUcriONS
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746
745
the defendant, V ernice B. Kuglin, had and received taxable
2 income in the sum of approximately $146,571.66, that well
knowing and believing the foregoing facts, the defendant
4 on or about Aprill5, 2000, in the Western District of
violation ofTitle 26, United States Code. Section 7201.

2
Count 6. That during the calendar year, 200 I.
3 the defendant, Vernice B. Kuglin. had and received income

4 tax or taxable income in the sum of approximately
5 Tennessee. did willfully attempt to evade and defeat the
5 $161,189.07, that well knowing and believing the foregoing
6 facts, the defendant on or about April 15 of2002, in the
7 Western District of defendant, did willfully attempt to
8 evade and defeat said income .tax due and owing by her to
9 the United States of America for said calendar year by
10 failing to make an income tax return on or about April
II said income tax and by filing a false W -4 - Form W -4 in
ll 15th, 2002, as required by law, to any proper officer of
12 1999, in violation of Title 26, United Stales Code,
12 the Internal Revenue Service, by failing to pay the
13 Section 7201.
13 Internal Revenue Service said income tax and by filing a
14
Count 5. That during the calendar year, 2000.
15 the defendant, Vernice B. Kuglin, had and received taxable
14 false Form W-4 in 2001, in violation of Title 26, United

15 States Code, Section 7201.
Simply put, the indiclment alleges that the
16 income in the sum of approximately $164,224.28, that well
16
17 knowing and believing the foregoing facts, the defendant,
17 defendant violated Section 7201 of Title 26 of the United
18 on or about April 15th, 2001, in the Western District of
18 States Code, which provides in relevant part:
19 Tennessee, did unlawfully attempt to evade and defeat the
19
20 to evade or defeat any tax imposed by the Internal Revenue
Any person who willfully attempts in any manner
21 Code shall be guilty of a crime.
22 income tax return on or before April 16, 200 l, as required
22
23 United States relies upon the honesty of taxpayers. The
24 government needs taxpayers to report timely, completely
25 said income tax and by filing a false Form W -4 in 2000, in
25 and honestly all taxes they owe so that it can collect the
The tax - the system of tax collection in the
JlJRY INSlRUCfiONS
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747
748
imposed by law. There are many different ways in which a
taxes due. Congress, therefore, bas made it a criminal

2 offense for a taxpayer to evade taxes, to file false
2 tax may be evaded or an attempt may be made to evade it.
3 returns or to file no return under certain circumstances.
3 For example, in this case, the government asserts that Ms.
4 Kuglin attempted to evade or defeat the income tax due by
In order for the crime of income tax evasion to

be proved, the government must establish beyond a
6 reasonable doubt each of the following elements:
filing false Form W -4s for application as to each tax year

6 alleged in the counts in the indictment
Fir.;t, that there was a tax deficiency.
Second that the defendant committed an
8 defendant failed to file a tax return for the years 1996,
There bas been evidence in this case that the
9 affmnative act constituting tax evasion or attempted tax
9 1997,1998,1999,2000and2001. !instructyouthat
10 evasion.
10 failure to file a tax return is not sufficient by itself
II
And, third, that the defendant acted willfully.
11 to satisfY this element. Indeed, the government must
12
The fliSt element of the offense which the
12 prove beyond a reasonable doubt an act of evasion.
13 government must prove beyond a reasonable doubt is that
13 Specifically, the government must prove that the defendant
14 there was a tax deficiency, that is that the defendant
14 committed an affinnative act constituting evasion. This
15 owed federal income tax fa- the years specified in the
15 must be a positive act of commis.ion designed to mislead
16 indictment as to the count that you're considering. The
16 or conceal. A willful act of omission is insufficient to
17 government does not have to prove the exact amount of the
17 satisfY this requirement, therefore, neither the failure
18 taxes the defendant owes, nor must the government prove
18 to file a return nor the failure to pay income tax can be
19 that the defendant evaded all of the tax that she owed.
19 the basis for conviction.
20
20
The second element that the government must
The Supreme Court of the United Slates bas
21 prove beyond a reasonable doubt as to each count is that
21 defined this element as requiring proof of conduct the
22 the defendant committed an affumative act constituting
22 lilcely effect of which would be to mislead or conceal. In
23 tax evasion.
23 other words, any act which is lilcely to mislead the
24
The Internal Revenue Code makes it a crime to
25 attempt, in any manner, to evade or defeat any income lax
24 government or conceal funds satisfies this element. Thus,

25 filing a false fonn. for example, a W-4 withholding form
JlJRY INSlRUCfiONS
JlJRY INSTRUCTIONS
749
750
or a false tax return is sufficient, as are false
to pay.
2 statements made to the Internal Revenue Service after the
3 return was due or filed. Large cash 113DSactions may also
3 requires a volunlary, intentional violation of a .known
4 be evidence of an affirmative act of evasion.
4 legal duty. The requirement of willfulness, therefore,
It is not necessary to prove a separate act
The word willfully in the criminal tax statutes
5 means an act undertaken with bad faith or evil intent or
6 constituting evasion for each tax year which was the
6 evil motive and want of justification in view of all of
7 subject of the prosecution; thus, filing a false W -4
7 the fmancial circumstances of the raxpayer.
8 withholding form satisfies this element as to each year
9 for which it was in effect.
9 arises even among taxpayers who eamestly wish to follow
10
The third element of the offense which the
11 government must prove beyond a reasonable doubt is that

12 the defendant acted .knowingly and willfully.
13
Whether or not the defendant acted .knowingly
14 and willfully is a question of fact to be determined by
In our complex tax system. uncertainty often
10 the law. It is not the purpose of the law to penalize

11 frank differences of opinion or innocent errors made
12 despite the exercise of reasonable care. Degrees of
13 negligence give rise in the tax system to civil penalties.
14 The requirement that an offense be committed willfully is
15 you based upon all of the evidence in this case. An act
15 not met, therefore, if a taxpayer has relied in good faith
16 is done .knowingly if it is done purposefully and
16 on a pria- decision of the Supreme Court, thats the
17 deliberately and not beeause of mistake, accident,
17 United Slates Supreme Court, the Internal Revenue Code or
18 negligence or any other innocent reason.
18 the regulations and instructions published by the Internal
19
19 Revenue Service. Thus, the word willfully under 26 United
The government must also prove beyond a
20 reasonable doubt that the defendant acted willfully. A
20 States Code, Section 7201 includes the concept ofbad
21 willful act is defined as a volunlary and intentional
21 faith or evil intent that separates the purposeful tax
22 violation of a known legal duty. Thus, the government
22 violator from the weU-meaning, but sometimes confused,
23 must prove beyond a reasonable doubt that the defendant
23 mass of innocent taxpayers.
24 possessed the specific intent to defeat or evade the
24
25 payment of income tax the defendant .knew it was her duty
25 faith mistake of the law's requiremenls. To malre such a
Willfulness is negated by the defense of good
JURY INS1RUCTIONS
JURY INS1RUCTIONS
751
752
determination, you must inquire into the defendant's mind,

2 her mental attitude and her approach to d!e situation
allowed by the law, then she is not guilty of the offenses

2 of lax evasion. II does not matter whether the defendant
which she believed the law required. If you find that the
3 was right or wrong in her beliefs, nor does it matter if
4 defendant subjectively in her own mind believed that she
4 her belief' make sense or sound reasonable lo you, the
5 was not required by lhe law to file the returns in

6 question, it will be your duly 1o fmd her not guilty.
7
A defendant does not act willfully if she
jury, or to me, as the judge. The only lhing tbal matters

6 is whether or not the defendant actually believed she was
7 correct in her actions. Also, it is not the defendant's
8 believes in good failh that her actions comply with the
8 burden 1o prove that she did not believe her actions
9 law. Therefore, if the defendant actually believed that
9 were - excuse me, it is not lhe defendant's burden to
!0 what she was doing was in accordance with the lax
10 prove that she did believe her actions were correct She
II slalules, she cannot be said to have lhe criminal intent
II doesn't have the burden, but rather it is lhe govermnent's
12 to willfully evade taxes. Thus, if you fmd tbalthe
12 burden to prove that she did not
13 defendant honestly believed that she owed no taxes, even
!3
14 if tbal belief was unreasonable or irrational, then you
14 government has proved that the defendant willfully
It is for you, lhe jury, to decide whether the
15 should find her not guilty. However, you may consider
15 committed tax evasion by proving beyond a reasonable doubt
16 whether the defendanfs belief was actually reasonable as
16 that she did not actually believe her actions were correct
17 a factor in deciding whether she held that belief in good
17 and by proving :ill the other elements that I have
18 faith. It should also be pointed out that neither the
18 explained 1o you in these instructions, or whether the
19 defendant's disagreement with the law nor her own belief
19 defendant believed her actions were proper. If you fmd
20 tbalthe law is unconstitutional, no matter how earnestly
20 tballhe govermnent has failed 1o meet its burden, lhen
21 tbal belief is held, constitutes a defense of good faith.
21 you must fmd the defendant not guilty of these offenses.
22 It is the duty of all citizens 1o obey the law regardless
22 If there's a reasonable doubt in your mind as to this

23 issue or even if you conclude that the defendant could
23 of whether they agree wid! it.

24
If the defendant acted in good faith, tbal is
25 to say she actually believed the actions she look were
24 only have believed her actions were proper by abysmal

25 ignOiaiice and lhe rankest kind of stupidity, yet you fmd
JURY INS1RUCllONS
JURY INS1RUCTIONS
753
754
payment of taxes is not optional.
that she believed tbal she was correct, and by correct, I

2 mean in conformance with the law, you must find the
3 defendant not guilty.
3 to the charges in this case, she asserts that she did not
The burden of establishing lack of good faith
As part of the defendant's good faith defense
4 file income tax returns or pay income taxes because she
5 and criminal intent rests upon lhe prosecution. A
5 had a good faith belief based upon her reading of the
6 defendant is under no burden to prove her good faith. The
6 Paperworlc Reduction Actlhat she was not required to
7 prosecution must prove bad faith or knowledge of falsity
7 comply with the lax laws because the fax forms and
8 beyond a reasonable doubt
In this case, the defendant is not presumed to
8 instructions did not comply with the provisions of the

9 Paperworlc Reduction Act Regarding this matter, I am
I 0 know the law. I instruct you, however, that the law is
I 0 instructing you as a matter of law, the Paperwork
II tbal wages are income and must be included in gross income
II Reduction Act does not apply 1o the statutory requirement
12 when determining income lax liability.
12 tbal an individual file a tax return, but applies only to
13
As a part of defendant's good faith defense to
13 the forms themselves which contain the appropriate number.
14 the charge in this case, the defendant asserts that she
14
15 did not file income tax returns or pay income taxes
15 about proving a defendant's stale of mind. Ordinarily,
Finally, I want to explain further something
16 because she had a good faith belief based upon the use of
16 there is no way that a defendant's state of mind can be
I 7 the word voluntary and various Internal Revenue Service
17 proved directly because no one can read another person's
18 publications tbalthe filing of tax returns and the
18 mind and tell what tbal person is thinking.
I 9 paymenl of income taxes was voluntary. Reganling Ibis
19
20 matter, I instruct you that the word voluntary is not the
20 indirectly from the surrounding circumstances. This
But a defendanfs stale of mind can be proved
21 equivalent of optional. To the extent tbal income taxes
21 includes things like what the defendant said, what the
22 are said to be voluntary, they are only voluntary in that
22 defendant did, how the defendant acted and any other facts
23 one files the return and pays the taxes without the
23 or circumstances in evidence that show what was in the
24 Internal Revenue Service first telling each individual the
24 defendanfs mind
25 amount due and then forcing payment of tbal amount The
25
You may also consider the natural and probable
JURY INSTRUCfiONS
JURY INSTRUCfiONS
755
756
results of any acts that the defendant knowingly did or
innocence of the accused defendant from the evidence in
2 did not do and whether it is reasonable 1o conclude that
2 this case. You are not called upon to return a verdict as
3 the defendant intended those results. This, of course, is
3 to the guilt or innocence of any other person or persons.
4 all for you, the jury, to decide.
4 You must determine whether or not the evidence in this
If you fmd that the government has proved
6 beyond a reasonable doubt each of the elements of the
5 case convinces you beyond a reasonable doubt of the guilt

6 of the accused regan!less of any belief you may have about
7 offense set out under these instructions, then as to the
7 the guilt or innocence of any other person or persons.
8 count that you are considering, you must return a verdict
9 of guilty as to that co\Dit. If you find that the
9 only for the purpose of dererring others from committing
10 government has not proved beyond a reasonable doubt each
10 crime.
You have no right lo find the defendant guilty
II of the elements of the offense as set out in these
II
12 instructions, then as to the count that you are
12 liability of a defendant and a defendant's criminal
There is a distinction between the civil
13 considering, you mlL<t return a verdict of not guilty as to
13 liability. Remember, this is a criminal case.
14 that count
14
15
15 commission of a crime, and the issue of whether the
I caution you, members of the jury, that you
The defendant is charged under the law with the
16 are here to detennine from the evidence in this case
16 defendant has or has not settled any civil liability for
17 whether the defendant is guilty or not guilty of Counts l,
17 the payment of taxes is not to be considered by you in
18 2, 3, 4, 5 and 6 of the indicbnent. The defendant is on
18 reaching a verdict. Your verdict in this case has no
19 trial only for the specific offenses alleged in the
19 effect on the government's ability to collect any back
20 indictment
20 !axes and penalties in a civil case.
21
21
Also, the question of punishment should never
Any verdict that you reach in the jury room,
22 be considered by the jury in any way in deciding the case.
22 whether guilty or not guilty, must be unanimous. In other
23 If the defendant is convicted, the matter of punishment is
23 words, to return a verdict, all of you must agree. Your
24 for the judge, and acrually for the law to determine.
24 deliberations will be secret You will never have to
25
You are here to determine the guilt or
25 explain your verdict to anyone.
JURY INSTRUCfiONS
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757
758
It is your duty as jurors to discuss the case
follows:
2 with one another in an effort to reach agreement, if you
3 can do so. Each of you must decide the case for yourself,
3 for our verdict say:
We the jury, on the charges in the indictment
l. We find the defendant, V emice B. Kuglin,
4 but only after full consideration of the evidence with the
5 other members of the jury. While you are discussing the
5 as 1o Count 1, and there's a blank line. Underneath that
6 case, do not hesitate to re-examine your own opinion and
6 line are these words, guilty or not guilty. And I will
7 change your mind if you become convineed that you were
7 tell you they are in alphabetical order, certainly no
8 wrong. But do not give up your honest beliefs solely
8 preference, just in alphabetical order.
9 because the others think differently or merely to get the
Count 2. We find the defendant, V emice B.
10 case over with.
10 Kuglin, as to Count 2, and there's another blank line with
II
II the choices \Didemeath those -- that line.
Remember, that in a very real way, you are
12 judges, judges of the fucts.

13
When you go to the jury room, you should fiTSt
12
Count 3. We find the defendant, Vemice B.
13 Kuglin, as to Count 3, and there's a blank line with those
14 select one of your members to act as your presiding juror.
14 choices.
15 The presiding juror will preside over your deliberations
15
16 and will speak for you here in court
16 Count 4, another blank line with those choices.
17
A verdict form has been prepared for your
18 convenience. The verdict form will be placed in a folder
17
We fmd the defendant, Vemice B. Kuglin, as to
5. We fmd the defendant, Vemice B. Kuglin,
18 as to Count 5, another blank line with those choices.
19 and handed to you by the cowt security officer. AI any
19
20 time that you're not deliberating, that is when you are at
20 Kuglin, as 1o Count 6, another blank line with those
21 lunch or during any break, the verdict folder and verdict
21 choices.
22 form should be delivered to the cowt security officer who
22
23 will deliver it to the courtroom deputy clerk for
23 word date underneath and a line on the bottom right which
Count 6, we fmd the defendant, Vemice B.
There's then a line on the bottom left with the
24 safekeeping.
24 is supposed to have presiding juror underneath it.
25
25
The verdict form in this case provides as
You will talce the verdict form to the jury
JURY INSTRUCf!ONS
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759
MR. BECRAFT: None, Your Honor. What was at
room, and when you have reached unanimous agreement,

2 you'll have your presiding juror fill in the verdict form
2 the charge conference, that was it
3 and sign and date it and then return to the courtroom.
If you should desire to communicate with me at

any time, please write down your message or question and
TilE COURT: Okay. rm going to let the
4 alternates go at this time. Of course, once they're
5 excused, they cannot return.
6 pass the note to the court security officer who will then
7 bring it to my attention. I will then respond as promptly
7 court.)
as possible after consulting with the parties and counsel.
THE COURT: We have two alternates in the case,
9 And I will respond either in writing or by having you
9 Ms. Sanders and, of course, Mr. Stewart, and in a moment,
10 return to the courtroom so that I can address you orally.
10 I will excuse them, and then they will be discharged in
II
I caution you, however, that with regard to any
12 message that you might send that you should not tell me
ll the case and they cannot return, so I need to be sure that

12 everybody is okay, that you don't have any crisis that is
l3 your numerical division at any time. In other words, you
13 going to cause you not 1o be available or that you're ill,
14 can never tell me the results of a vote of the jury, only
14 I certainly wantlo know those things. If anybody is not
15 that you have reached a verdict or not reached a venlict.

16
If you a feel to see the exhibits, and they're
15 well or has a problem that is, they think, going to take

16 them away from the deliberative process, then this is your
17 not being sent back right now, simply advise the court
17 chance to tell me. I don't see any problems in that
18 security officer and. frankly, we will let you have
18 regard. Well, Ms. Sanders, we appreciate your service,
19 whichever exhibits you would like. You can have them all,
19 we're going to let you be discharged. And Mr. Stewart, I
20 if you would like.
20 will actually let both of you go out through the jury room
21
Let me see counsel at side bar.
21 first, and you can actually come around so you don't have
22
22 to walk in front of everybody. Thank you for serving on
23 the panel, and we appreciate it Thank you very much.
23 bench.)
24
THE COURT: Objections by the United States?
24 You want to come back and watch? Sure. But you can't
25
25 talk 1o anybody. Okay. All right. That's no problem.
JURY INSTRUCfiONS
JURY INSTRUCfiONS
762
761
All right. I made a couple of very minor
2 changes, and I still may not have caught every little
3 grammatical ma1ler or misspelling, but
rm going to make
4 those before I send the instructions back lo you. I am

going to hand the folder with the indictment and the
break.
2
All twelve of you do have lobe logether at the
3 same time for any deliberations to occur. If somebody

4 does take a restroom break. you should slop your
5 deliberations at that time and resume when everybody is
6 venlict form in it. and we will probably have these very
6 reassembled.
7 quickly, it is very minor cha!lges. But we will -- I will
8 make those changes before I send them back. Mrs. Saba, I
8 you the folder, and ladies and gentlemen, you are excused
9 think rm going to go ahead and hand the folder lo you.
9 lo begin your deliberations. Thank you very much.
l 0 Mr. Tuggle is there, of course, already.

ll
Ladies and gentlemen. if you want to take your
10
All right Mr. Tuggle, we're going lo hand lo
(Jury out 1o begin deliberations atll:50
II a.m.)
12 lunch break at the regular time, all you have to do is
12
13 return the folder 1o the court security officer, and
13 of the exhibits in order. I think we do. I didn't
14 that's our signal that you're taking your lunch break. If
14 actually look at the ooe that was the modified CFR
15 you do take a lunch break, I suggest that you make it not
15 material, but I take it everybody has looked at that And
16 terribly long, probably an hour, or if you want lo make it
16 I did indicate lo the jury that they could retrieve them
THE COURT: I did assume that we now have all
l 7 less, it is up 1o you, you have control of that at this
17 all. Does anybody have any objections to them having the
18 point in time. We will not be staying particularly late,
18 exhibits if they request them?
19 that's usually not a good idea, but if the jury asks me to
19
MR. MURPHY: Judge, I don't have any objection.
20 stay late, we will, but typically we usually let you go
20
21 home about 5:00 or a little after 5:00 and you come back
21
TilE COURT: And defense has no objeetion also.
22 at your regular time lomorrow. And you can take brealcs,
22
23 as I indicated in the afternoon. If you want lo take a
23
TilE COURT: All right I think that takes care
24 break, then again hand the folder back lo the court
24 of everything. By the way, if we do not hear from the --
25 security officer, and that's an indication that you're on
25 I will ask you to make sure that MIS. Saba has a pager
763
764
number and so forth, cell phone, whatever is necessary to
to that, I think that makes sense.
2 be in touch with evexybody, and if you have not heard from
3 anybody at all, and this could happen by, say, quarter of
3 to kind of move in the direction of maybe a weak Allen
.MR. BECRAFT: Neither do I. If the court wanls
4 5:00, you should be back here at that time anyway because
4 charge, is that a suggestion?
5 we will be letting the jury go home, and you probably will
6 want to be back when we let the jury go home.
.MR. BECRAIT: We will probably camp out
THE COURT: Well. we could do that. Let's see,

6 there is a - the modified Allen -
.MR. MURPHY: Judge, 1 think it's kind of early.
8 downstair.; in the snack bar, Your Honor.

9
THE COURT: I think it is too. I was just
THE COURT: Wherever you want to be is fine.
9 looking at9.04. Normally, what I do is just tell people
THE CLERK: All rise.
11 six-count case, frankly, and I'm going to ask them to go
12
(Recess taken atll:51 am.)
12 home now since it is almost 4:00 o'clock, come back
13
(fhe following proceedings were had at4:45
10 that, you know, it's just not been really very long in a
10 Okay.
11
14 pm.)
15
13 tomorrow at 8:30 and resume deliberations when they're

14 ready tomorrow and see how things go, and that's what 1
THE COURT: We have a note from the jury, and
16 the jury note reads: We, the jury, callllOt reach a
15 think we ought to do, and I think that's about all fm

16 going to say now.
17 decision on this case at this time. Signed by the
17
MR.BECRAFT: Noobjection.
18 foreman. I'm trying to - his name is a little hard to
18
THE COURT: Any objection?
19 read. Joseph Schingle is in seat -- the last seat. rm
19
.MR. MURPHY: No objection, Your Honor.
20 not sure.
20
THE COURT: Well, let the jury come in and let
21
21 them go home.
Well, it's aciUally been a fairly short period
22 of time to deliberate, frankly, and normally, simply tell
22
23 them that it has not been vexy long and that they need to
23
THE COURT: I have a note tiom the jury - and
24 deliberate some more.
24 I will let everybody be seated. The procedure is the same
25
MR. MURPHY: Judge, I don't have any objection
25 in every note. and that is that I first talk with the
766
765
say that you have not really been deliberating that long,
parties, and then we decide -- actually, I get to decide
2 what the response is after input from them, but we always
2 and it's not uncommon for juries to have to deliberate
3 read the note out loud IllSL The note says, August the
3 significantly longer to reach agreement. You can always
4 7th of2003 at4:32 p.m. We, the jury, cannot reach a
4 communicate with me. You know how to communicate with me,
5 decision on this case at this time. Signed by Joseph
5 and rm not trying to be indifferent to your note, but I
6 Schingle, the foreper.;on in the case. I hope I got the
6 think that's what we ought to do at this time.
7 nameright.
JUROR SCHJNGLE: Yes, sir.
8 let everybody rest up and come back fresh tomorrow. Mr.
THE COURT: Well, let me tell you what I think
10 we ought to do. It is not uncommon for juror.; to send me
So I think a good nighes sleep would be good,
9 Tuggle asked me if the Red Birds were playing, and 1 don't

10 have tickels for every game, so I'm not sure if they're
11 a note like that fairly early in deliberations. You have
11 playing tonight. Do something else, don't think about the
12 actually not been deliberating that long. It may seem
12 case, and when you come back lomorrow and you're all
13 like a long time to you, it probably does, but you have
13 together, we will let you resume your discussions. So
14 not really been deliberating that long. And the thing we
14 have a- the temperature has been nice today, it has not
15 ought to do is, pretty straightforward, I'm going to let
15 been very hot. you get to get out a little early. Have a
16 you go home at 5:00 o'clock today anyway and ask you to
16 nice afternoon. We will see you at 8:30 tomorrow. Don't
17 come back at 8:30 lomorrow like you have been doing every
17 discuss the case with anybody, don't let anybody talk with
18 day. When you're all together and you have had your cup
18 you about it, the same instructions that you have had in
19 of coffee and snack and you're ready to begin your
19 the past We will see you tomorrow at 8:30. Thanks very
20 delibenllions. simply knock on the door, and Mr. Tuggle
20 much.
21 will probably- you will be here tomorrow?
21
(Jury out at4:50 p.m.)
22
COURT SECURITY OffiCER: Yes.
22
THE COURT: Y'all can be seated. I do need to
23
THE COURT: Mr. Tuggle will be here tomorrow,
23 ask, any objection to the instruction by the United
24 and he will hand you the verdict folder with the
24 Statesry
25 enclosures and let you resume your deliberations. Just
25
.MR. MURPHY: No, sir, Your Honor.
~--
767
TilE COURT: Any objection from the defense?
2
MR. BECRAIT: None, Your Honor.
TilE COURT: All right. Gentlemen and ladies,
IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DMSION
4 you really don't have to be here at 8:30 at all tomorrow.

5 And I know you have things to catch up on. You're welcome
6 to be here. I'm glad to have you here if you would like
Plaintiff,
7 to be. We have something at9:00. It's really a light
VS.
NO. 03-20111-MI
day. I do have a few things in and out of here during the

VERNICE KUGLIN,
9 day, but malc:e sure Mrs. Saba has a number where we can
Defendant.
I 0 reach you. We will see you tomorrow.

II
THE CLERK: AU rise.
12
TRIAL PROCEEDINGS
13
14
BEFORE TilE HONORABLE JON PHIPPS MCCALLA, JUDGE
15
AUGUST 8, 2003
16
VOLUMEV
17
18
19
20
BRENDA PARKER
OFFICIAL REPORTER
167NORTIIMAIN STREET
21
22
23
24
25
770
769
APPEARANCES
FRIDAY MORNING & AFTERNOON

2
AUGUST 8, 2003
The lrial in this case resumed on this date,
4 Friday, August 8, 2003, at 2:00 o'clock p.m., when and

167 NORTil MAIN STREET
5 where proceedings were had as follows:
7
8
9
(The following proceedings were had at 2:00
LOWELL H. BECRAIT, JR.

209 LINCOLN STREET
HUNTSVILLE. ALABAMA 3580 l
10 p.m.)

12 we will have the jury come in, and the foreman in this
II
TilE COURT: AU right. The procedure is that
13 case is Mr. Schingle. We will ask him to bring the folder

14 to the stand, the podium closest to me, he will hand it to
15 Ms. Flagg, and she will hand it to me. I will look at it
16 to malc:e sure it is signed and dated and filled in. If it
17 is signed and dated, then I will hand it back to Mr.
18 Schingle and have him read the verdict. The procedure is
19 that. of course, after that, after he reads the whole
20 verdict, then I will start with Ms. Vasser in seat one and
21 ask each person is it their verdict, and then if everybody
22 says it is, then it becomes the official verdict in the
23 case. I just remind everybody that whatever it is, and I
24 don't have any idea what it will be, I ask everybody not
25 to say anything, there isn't anything to say really at
771
772
this poinl in time, and we will take up any later matters,
Count I?
2 if there are :my to take up, as soon as I discharge the
JUROR SCHINGLE: Not guilty, Your Honor.
3 jury. Okay. Bring them in.
THE COURT: What is the verdict on Count 2?
THE COURT: I will have the foreman come around
THE COURT: What is the verdict on Count 3?
6 to the podium. Everybody have a seat. I'm going to
JUROR SCHINGLE: Not guilty.
7 ask - to this podium.
THE COURT: And what the verdict on Count 4?
THE COURT: The verdict on Count 5?
JUROR SCHINGLE: Oh, I'm sorry.

9
THE COURT: That's no problem. What you have
10 to do is, we're going to, in just a second, let you hand
10
II the folder with the material to me first. I have to look
II
THE COURT: And the verdict on Count 6?
12 at it, make sure it is signed, dated and filled out
12
JUROR SCHINGLE: Not guilty. Your Honor.
13 Before we read anything. if something wasn't signed and
13
THE COURT: Let me ask you as foreman and also
14 dated and filled out, I have to hand it back, so I have to
14 in your individual juror capacity, do you agree with the
15 always check.
16
15 verdict?
Everything is in order. I will hand it back
16
JUROR SCHINGLE: Yes, I do.
17 and, Mr. Schingle, I'm going to ask you to start with
17
THE COURT: Let me ask Ms. Vasser, is this also
18 Co\Dlt I and just read them, I, 2, 3, 4, 5 and 6, and give
18 your verdict?
19 us your verdict on each one as you read the verdict form.
19
JUROR VASSER: Yes.
20 And then rm start with Ms. Vasser in seat one, I will ask
20
THE COURT: And Mr. Vetter, is it also your
21 each of you in onler is this your verdict, because, of
21 verdict?
22 course, the verdict does have to be unanimous.
22
JUROR VETTER: Yes.

THE COURT: Ms. Snodgrass, is it your verdict?
23
JUROR SCHINGLE: Do I read it or just tell you?
23
24
THE COURT: I can do it like they do on
24
JUROR SNODGRASS: Yes, it is.
25
THE COURT: Mr. Stovall, is it your venlict?
25 television too. Would you tell me what the verdict is on
774
773
JUROR STOVALL: Yes.
2
THE COURT: And Mr. Smith- and there are
anybody you would like to about the case. There's one

2 rule, and that is that the lawyer.; and the parties can't
3 several Mr. Smiths, so I better say Mr. Alphonso Smith?
3 really quiz you about the verdict. You can speak to them.
4 you can tell them about the venlict if you want to, and
JUROR ALPHONSO SMITH: Yes, sir.

THE COURT: Mr. Keith Smith?
you may be interested in talking to them, that's fine,
JUROR KEITH SMITH: Yes, sir.
6 there's nothing wrong with that, but they're not going to
THE COURT: Mr. Shaneyfelt?
7 ask you a lot of questions because the jury deliberations
JUROR SHANEYFELT: Yes.
8 are not something that they are allowed to inquire into,
THE COURT: Ms. Stidham?
9 so, you know, they might ask you, you know, what was it
10
JUROR STIDHAM: Yes.
10 like to serve on a jury, but that's about it. So I need
II
THE COURT: Mr. Inderbitzen?
II to let you know that that is the reason they won't be
12
JUROR INDERBITZEN: Yes, it is.
12 asking you. If you do speak to them. they won't be asking
13
THE COURT: And Ms. Stout?
13 you any questions at all.
14
JUROR STOUT: Yes, Your Honor.
14
15
THE COURT: And Mr. Simpson?
15 other people to serve on juries. We have a lot of folks
16
JUROR SIMPSON: Yes.
16 who by not to, and we just want you to please tell people
17
THE COURT: All right I'm going to ask you to
18 hand the- well, you have handed the folder, rm going to
The next thing is that we want you to encourage
17 not to. And the third thing is that I want to thank you
18 for serving on the panel. It turned out to be about the
19 let you go back to your seat then. and hand the folder to
19 length we projected, it doesn't always work out that way,
20 Ms. Flagg, it does become the official verdict in the
20 so I feel pretty good about this case in terms of the
21 case, and it is reconled, so it will conclude all matters
21 length, but we do appreciate each of you being able to
22 in the case.
22 serve on the jury.
23
23
I need to tell you a couple of things. First
So what I'm going to do in just a second is rm
24 of all, in just a second, I'm going to disch:uge you as
24 going to discharge you, let you go to the jury room. I'm
25 jurors in the case. And at that time, you can talk with
25 going to let the parties here be excused. and then if you
775
776
want to speak to them after you have gone to the jury
happened?
2 room. then Mr. Tuggle will open the door afler I've left,
UNIDENTIFIED PERSON: Yes.
3 and then you can either come back in here or you can leave
TilE COURT: I have got my two alternates here,
4 and go out the other door, whichever way you want to go.
4 I thought I would just say that while you were here.
Again, you're not obligated to speak to anybody at all.

6 Don't feel like you have to. Again, thank you very much
7 for serving on the jury, and at this time, ladies and
gentlemen, you are discharged in the case and you are
That's all, you just wanted to get a picture with

6 everybody, is that right?
7
UNIDENTIFIED PERSON: Yes, sir.
That's what I understood that happened, I
9 didn't attribute any particular significance to that.
9 excused Thank you very much.

10
(Jury out at 2:05 a.m)
10
Who took your picture?
11
TilE COURT: There is one thing I need to tell
11
UNIDENTIFIED PERSON: II was just--
12 the parties about and then we will be concluded. And I
12
UNIDENTIFIED PERSON: I did, Your Honor.
13 didn't tell the parties this morning about this, frankly,
13
TilE COURT: That's okay. But there wa.o;n't any
14 because the jury had begun deliberations - you can have a
14 big deal about it. That's a little unusual. It's nothing
15 seat just for a second. I frankly don't attribute
15 wrong with it in the least, but if somebody comes and
16 anything to this, but if somebody tells me something, I
16 tells me about something, I just have to tell these guys,
17 need to convey it to you. And that is that last evening
17 that's the way it wod:s. So anything else from the United
18 about 5:30 or so, I think it was Ms. Pigues and perhaps
18 States?
19 Mr. Tuggle did come in and say that the jurors, as they
19
20 were leaving in the basement area, I think somebody was
20 on notice, she has got to pay taxes, I think the court
21 taking their photographs, and I don't really attribute
21 ought to instruct her that that is the law. She ha. got
22 much to tbal I think they did ask perhaps someone who
22 to file returns and -
23 was a member of the audience to take pictures, maybe the
23
24 allernates may have, I don't know, is that what happened?
24 cleaned up totally.
25 I have got my two allernates here. Is that all that
25
MR. MURPHY: Just one thing, to put Ms. Kuglin
MR. BECRAFT: Your Honor, that is going to be
TilE COURT: Okay. Well, Mr. Murphy is not
778
7TI
incorrect that it is the law, and I think what he's also
CERTIFICATE
2 saying is there will still be civil penalties.

3
I, Brenda Parker, do hereby certify that the
MR. BECRAFT: I expect probably 90-day letters
4 to be coming pretty quick.
foregoing pages 1-778 are, to the best of my knowledge,
TIIECOURT: Okay.
skill and ability, a true and accurate transcript from my
MR. BECRAFT: And there's going to be civil
7 proceedings, and she is going to being take
stenotype notes of the trial on August 4-8, 2003, in the

matter of
8 responsibility - she is going to be doing things to

9 respond to all of that like file returns, Your Honor.
10
TilE COURT: Well, fmjustthejudgehere, I'm
11 not the IRS, so I think I'll leave that up to the other

12 folks. Anything -- I asked the government. Anything from
United States of America
13 the defense?
vs.
14
MR. BECRAFT: Your Honor, I think on behalf of
V ernice B. Kuglin
15 all the lawyers, I would like to say that it has been a

16 pleasure to be in your court.
17
TilE COURT: Well, thank you. We're going to
Dated this 26th day of September, 2003.
18 let everybody be excused.

19
MR. MURPHY: Thank you, Judge.
20
21
MR. BERNHOFT: Thank you.
22
TilE CLERK: All rise, please. This Honorable
23 United States District Court now stands adjourned.

24
25
(Court adjourned at2:15 p.m.)
BRENDA PARKER
Official Court :ReJ>orte!

United States District Court
Western District of Tennessee
107TH CONGRESS}
2d Session
COMMITTEE PRINT
FEDERAL RULES
OF
EVIDENCE
DECEMBER 1. 2002
Printed for the use

of
THE COMMITTEE ON THE JUDICIARY

HOUSE OF REPRESENTATIVES
U.S. GOVER.".,MENT PRINTING OFFICE

WASHINGTON : 2002
For sale by the U.S. Government Pr!nt!ng- Off!ce

Superintendent of Documents. Ma.!l Stop: SSOP. Wa.sh!ng-ton. DC 20402-9328
151
No.8
15
FEDER.A..L RULES OF EVIDENCE
Rule 803
ARTICLE VIII. HEARSAY

Rule 801. Definitions
The following definitions apply under this article:

(a) Statement.-A "statement" is (1) an oral or written assertion or (2) nonverbal conduct of a person, if it is intended by the
person as an assertion.
(b) Declarant.-A "declarant" is a person who makes a statement.
(c) Hearsay.-"Hearsay is a statement. other than one made by
the declarant while testifying at the trial or hearing. offered in
evidence to prove the truth of the matter asserted.
(d) Statements which are not hearsay.-A statement is not hearsay if(1) Prior statement by witness.-The declarant testifies at
the trial or hearing and is subject to cross-examination concerning the statement, and the statement is (A) inconsistent
with the declarant's testimony. and was given under oath subject to the penalty of perjury at a trial, hearing, or other proceeding, or in a deposition, or (B) consistent with the declarant's testimony and is offered to rebut an express or implied
charge against the declarant of recent fabrication or improper
influence or motive, or (C) one of identification of a person
made after perceiving the person; or
(2) Admission by party-opponent.-The statement is offered
against a party and is (A) the party's own statement, in either
an individual or a representative capacity or (B) a statement
of which the party has manifested an adoption or belief in its
truth, or (C) a statement by a person authorized by the party
to make a statement concerning the subject, or (D) a statement by the party's agent or servant concerning a matter
within the scope of the agency or employment, made during
the existence of the relationship, or (E) a statement by a coconspirator of a party during the course and in furtherance of
the conspiracy. The contents of the statement shall be considered but are not alone sufficient to establish the declarant's
authority under subdivision (C), the agency or eHlployment relationship and scope thereof under subdivision (D)., or the existence of the conspiracy and the participation therein of the
declarant and the party against whom the statement is offered
under subdivision (E).
(As amended Oct. 16, 1975, eff. Oct. 31, 1975; Mar. 2, 1987, eff. Oct.
1, 1987; Apr. 11, 1997, eff. Dec. 1, 1997.)
Rule 802. Hearsay Rule
Hearsay is not admissible except as provided by these rules or

by other rules prescribed by the Supreme Court pursuant to statutory authority or by Act of Congress.
Rule 803. Hearsay Exceptions; Availability of Declarant Immaterial
The following are not excluded by the hearsay rule, even though
the declarant is available as a witness:
(1) Present sense impression.-A statement describing or explaining an event or condition made while the declarant was
perceiving the event or condition, or immediately thereafter.
152
Rule 803
FEDERAL RULES OF EVIDENCE
16
(2) Excited utterance.-A statement relating to a startling

event or condition made while the declarant was under the
stress of excitement caused by the event or condition.
(3) Then existing mental. emotional, or physical condition.A statement of the declarant's then existing state of mind.
emotion. sensation. or physical condition (such as intent.
plan, motive. design. mental feeling, pain. and bodily health).
but not including a statement of memory or belief to prove
the fact remembered or believed unless it relates to the execution, revocation. identification, or terms of declarant's will.
(4) Statements for purposes of medical diagnosis or treatment.-Statements made for purposes of medical diagnosis or
treatment and describing medical history, or past or present
symptoms, pain, or sensations, or the inception or general
character of the cause or external source thereof insofar as
reasonably pertinent to diagnosis or treatment.
(5) Recorded recollection.-A memorandum or record concerning a matter about which a witness once had knowledge
but now has insufficient recollection to enable the witness to
testify fully and accurately, shown to have been made or
adopted by the witness when the matter was fresh in the witness' memory and to reflect that knowledge correctly. If admitted, the memorandum or record may be read into evidence
but may not itself be received as an exhibit unless offered by
an adverse party.
(6) Records of regularly conducted activity.-A memorandum, report, record, or data compilation, in any form, of acts,
events, conditions, opinions, or diagnoses, made at or near the
time by, or from information transmitted by, a person with
knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record or data
compilation, all as shown by the testimony of the custodian or
other qualified witness, or by certification that complies with
Rule 902(11), Rule 902(12), or a statute permitting certification,
unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness. The
term "business" as used in this paragraph includes business,
institution, association, profession, occupation, and calling of
every kind, whether or not conducted for profit.
(7) Absence of entry in records kept in accordance with the
provisions of paragraph (6).-Evidence that a matter is not included in the memoranda reports, records. or data compilations, in any form, kept in accordance with the provisions of
paragraph (6), to prove the nonoccurrence or nonexistence of
the matter, if the matter was of a kind of which a memorandum, report, record, or data compilation was regularly made
and preserved, unless the sources of information or other circumstances indicate lack of trustworthiness.
(8) Public records and reports.-Records, reports. statements, or data compilations, in any form, of public offices or
agencies, setting forth (A,' the activities of the office or agency, or (B) matters observed pursuant to duty imposed by law
as to which matters there was a duty to report, excluding,
however, in criminal cases matters observed by police officers
153
17
Rule 803
and other law enforcement personnel, or (C) in civil actions

and proceedings and against the Government in criminal
cases, factual findings resulting from an investigation made
pursuant to authority granted by law, unless the sources of information or other circumstances indicate lack of trustworthiness.
(9) Records of vital statistics.-Records or data compilations, in any form, of births, fetal deaths, deaths. or marriages, if the report thereof was made to a public office pursuant to requirements of law.
(10) Absence of public record or entry.-To prove the absence
of a record, report, statement, or data compilation, in any
form, or the nonoccurrence or nonexistence of a matter of
which a record, report, statement, or data compilation, in any
form. was regularly made and preserved by a public office or
agency, evidence in the form of a certification in accordance
with rule 902, or testimony, that diligent search failed to disclose the record, report, statement, or data compilation, or
entry.
(11) Records of religious organizations.-Statements of
births, marriages, divorces, deaths, legitimacy, ancestry, relationship by blood or marriage, or other similar facts of personal or family history, contained in a regularly kept record
of a religious organization.
(12) Marriage, baptismal, and similar certificates.-Statements of fact contained in a certificate that the maker performed a marriage or other ceremony or administered a sacrament, made by a clergyman, public official, or other person
authorized by the rules or practices of a religious organization
or by law to perform the act certified, and purporting to have
been issued at the time of the act or within a reasonable time
thereafter.
(13) Family records.-Statements of fact concerning personal
or family history contained in family Bibles, genealogies,
charts, engravings on rings, inscriptions on family portraits,
engravings on urns, crypts, or tombstones, or the like.
(14) Records of documents affecting an interest in property.-The record of a document purporting to establish or affect an interest in property, as proof of the content of the
original recorded document and its execution and delivery by
each person by whom it purports to have been executed, if the
record is a record of a public office and an applicable statute
authorizes the recording of documents of that kind in that office.
(15) Statements in documents affecting an interest in property.-A statement contained in a document purporting to establish or affect an interest in property if the matter stated
was relevant to the purpose of the document, unless dealings
with the property since the document was made have been inconsistent with the truth of the statement or the purport of
the document.
(16) Statements in ancient documents.-Statements in a document in existence twenty years or more the authenticity of
which is established.
154
Rule 804
FEDERAL RULES OF E\"IDENCE
18
(17) Market reports, commercial publications.-Market

quotations, tabulations, lists. directories. or other published
compilations, generally used and relied upon by the public or
by persons in particular occupations.
(18) Learned treatises.-To the extent called to the attention
of an expert witness upon cross-examination or relied upon by
the expert witness in direct examination. statements contained in published treatises, periodicals. or pamphlets on a
subject of history. medicine. or other science or art. established as a reliable authority by the testimony or admission of
the witness or by other expert testimony or by judicial notice.
If admitted, the statements may be read into evidence but
may not be received as exhibits.
(19) Reputation concerning personal or family history.-Reputation among members of a person's family by blood. adoption, or marriage, or among a person's associates. or in the
community, concerning a person's birth, adoption. marriage.
divorce, death, legitimacy, relationship by blood. adoption, or
marriage, ancestry, or other similar fact of personal or family
history.
(20) Reputation concerning boundaries or general history.Reputation in a community, arising before the controversy, as
to boundaries of or customs affecting lands in the community,
and reputation as to events of general history important to
the community or State or nation in which located.
(21) Reputation as to character.-Reputation of a person's
character among associates or in the community.
(22) Judgment of previous conviction.-Evidence of a final
judgment, entered after a trial or upon a plea of guilty (but
not upon a plea of nolo contendere), adjudging a person guilty
of a crime punishable by death or imprisonment in excess of
one year, to prove any fact essential to sustain the judgment.
but not including, when offered by the Government in a criminal prosecution for purposes other than impeachment. judgments against persons other than the accused. The pendency
of an appeal may be shown but does not affect admissibility.
(23) Judgment as to personal, family, or genePal history, or
boundaries.-Judgments as proof of matters of personal. family or general history, or boundaries, essential to the judgment, if the same would be provable by evidence of reputation.
(24) [Other exceptions.) [Transferred to Rule 807)
(As amended Dec. 12, 1975; Mar. 2, 1987, eff. Oct. 1, 1987; Apr. 11,
1997, eff. Dec. 1, 1997; Apr. 17, 2000, eff. Dec. 1, 2000.)
Rule 804. Hearsay Exceptions; Declarant Unavailable
(a) Definition of unavailability.-"Unavailability as a witness''

includes situations in which the declarant(1) is exempted by ruling of the court on the ground of privilege from testifying concerning the subject matter of the declarant's statement; or
(2) persists in refusing to testify concerning the subject matter of the declarant's statement despite an order of the court
to do so; or
(3) testifies to a lack of memory of the subject matter of the
declarant's statement; or
'
155
l.Q-1
26 CFR Ch. I (4-1-Q3 Edition)
Section 1.28-1 also issued under 26 U.S.C.

28(d)(5);
Section 1.30-1 also issued under 26 u.s.c.
30(d)(2).
Sections 1.42-1T and 1.42-2T also issued
under 26 U.S.C. 12(m);
Section 1.42-2 also issued under 26 U .S.C.
12(m):
42(n);
Section 1.42--4 also issued under 26 U .S.C.
42(n):
42(n);
Sections 1.42-6. 1.42-8. 1.42-9. 1.42-10. 1.42-11.
and 1.42-12, also issued under 26 U .S.C. 42(n);
42(n);
42(n):
42(n);
Section 1.42-16 also issued under 26 U .S.C.
42(n);
42(n);
Sections 1.43-0-1.43-7 also issued under
section 26 U.S.C. 43:
Section 1.45D-1T also issued under 26
U.S.C. 45D(il:
Section 1.46--5 also issued under 26 U.S.C.
46(d)(6) and 26 U.S.C. 47(a)(3)(C);
Section 1.46--6 also issued under 26 U .S.C.
46([)(7);
47(a);
38(b) (as in effect before the amendments
made by subtitle F of the Tax Reform Act of
1981);
Sections 1.50A-1.50B also issued under 85
Stat. 553 (26 U.S.C. 40(b));
52(b);
Section 1.56--1 also issued under 26 U.S.C.
56(f)(2)(HJ:
Section 1.56(g)-1 also issued under section
7611(g)(3) of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239. 103 Stat.
2373): and
58(h).
Be it enacted bJt the Senate and House of Representatives of the United States of America in
Con.qress assembled, That
(a) Citation. (1) The provisions of this Act
set forth under the heading "Internal Revenue Title" may be cited as the "Inoe1nal
Revenue Code of 1954"
(2) The Internal Revenue Code enacted on
February 10. 1939. as amended. may be cited
as the "Internal Revenue Code of 1939".
(b) Publication. This Act shall be published
as volume 68A of the United States Statutes
at Large. with a comprehensive table of contents and an appendix: but without an index
or marginal references. The date of enactment. bill number. public law number. and
chapter number. shall be printed as a headnote.
(c) Cross reference. For saving provisions.
effective date provisions. and other related
provisions. see chapter 80 (sec. 7801 and following) of the Internal Revenue Code of 1954.
(d) Enactment of Internal Revenue Title into
law. The Internal Revenue Title referred to
in subsection (a)(1) is as follows:
In general. the provisions of the Internal

Revenue Code of 1954 are applicalJle with respect to taxable years beginning after December 31. 1953. and ending after August 16.
1954. Certain provisions of that Code are
deemed to be included in the Inte1nal Revenue Code of 1939. See section 7851.
(b) Scope o( requlations. The regulittions in
this part deal with (1) the inc;ome taxes Imposed unde1 subtitle A of the Intermtl Revenue Code of 1954. and (2) certain ndministmtive provisions contained in subtitle F or
such Code relating to such taxes. In geneml.
the applicability of such regulations is commensurate with the applicnbility of the respective provisions of the Internal Revenue
Code of 1954 except that with respect to the
provisions of the Internal Revenue Code of
1954 which are deemed to be included in the
Internal Revenue Code of 1939. the regulations relating to such provisions are applice.ble to certain fiscal years and short taxable
years which are subject to the Internal Revenue Code of 1939. Those provisions of the
regulations which are applicable to taxable
years subject to the Internal Revenue Code
of 1939 and the specific taxable yee.rs to
which such provisions are so applicable are
identified in each instance. The 1egulntions
in 26 CFR (1939) part 39 (Regulations 118) are
continued in effect until superseded by the
regulations in this part. See Trensur:v Decision 6091, approved August 16. 1951 119 FR
5167. C.B. 1954-2. 47).
SOURCE: T.D. 6500. 25 FR 11402, Nov. 26, 1960:

25 FR 14021. Dec. 21. 1960. unless otherwise
noted.
L0-1 Internal Revenue Code of 1954

and regulations.
(a) Enactment of law. The Internal
Revenue Code of 1954 which became law
upon enactment of Public Law 591. 83d
Congress. approved August 16. 1954. provides in part as follows:
156
Internal Revenue Service, Treasury
1.1-1
lowed against the amount of the tax.
See part IV (section 31 and following).
subchapter A, chapter 1 of the Code. In
general, the tax is payable upon the
basis of returns rendered by persons
liable therefor (subchapter A (sections
6001 and following). chapter 61 of the
Code) or at the source of the income by
withholding. For the computation of
tax in the case of a joint return of a
husband and wife. or a return of a surviving spouse. for taxable years beginning before January 1. 1971. see section
2. The computation of tax in such a
case for taxable years beginning after
December 31, 1970. is determined in accordance with the table contained in
section 1(a) as amended by the Tax Reform Act of 1969. For other rates of tax
on individuals, see section 5(a). For the
imposition of an additional tax for the
calendar years 1968. 1969. and 1970. see
section 51( a).
(2)(i) For taxable years beginning on
or after January 1. 1964. the tax imposed upon a single individual. a head
of a household. a married individual
filing a separate return. and estates
and trusts is the tax imposed by section 1 determined in accordance with
the appropriate table contained in the
following subsection of section 1:
NORMAL TAXES AND SURTAXES
DETERMINATION OF TAX LIABILITY

TAX ON INDIVIDUALS
1.1-1
Income tax on individuals.
(a) General rule. (1) Section 1 of the

Code imposes an income tax on the income of every individual who is a citizen or resident of the United States
and, to the extent provided by section
871(b) or 877(b). on the income of a nonresident alien individual. For optional
tax in the case of taxpayers with adjusted gross income of less than $10.000
(less than $5,000 for taxable years beginning before January 1. 1970) see section 3. The tax imposed is upon taxable
income (determined by subtracting the
allowable deductions from gross income). The tax is determined in accordance with the table contained in
section 1. See subparagraph (2) of this
paragraph for reference guides to the
appropriate table for taxable years beginning on or after January 1. 1964. and
before January 1. 1965. taxable years
beginning after December 31. 1964. and
before January 1. 1971. and taxable
years beginning after December 31.
1970. In certain cases credits are alTaxable years beginning
in 1964
Single individual ................. .

Head of a household ......... .
Married individual filing a
separate return.
Estates and trusts .............. .
Taxable years beginning

after 1964 but before
1971
Taxable years beginnmg after Dec. 31.
1970 (references in this column are to

the Code as amended by the Tax Reform
Act of 1969)
Sec. 1(a)(1) ....

Sec. 1(b)(1) .....................
Sec. 1(a)(1) .....................
Sec. 1(a)(2)
Sec. 1(b)(2)
Sec. 1(a)(2) ........ ..
Sec. 1(c).
Sec. 1(b).
Sec. 1(d).
Sec. 1(a)(1) ..
Sec. 1(a)(2) ......... ..
Sec. 1(d).
than a surviving spouse) who is a nonresident of the United States for all or
part of the taxable year. See paragraph
(b)(2) of 1.871-8.
(3) The income tax imposed by section 1 upon any amount of taxable income is computed by adding to the income tax for the bracket in which that
amount falls in the appropriate table
in section 1 the income tax upon the
excess of that amount over the bottom
of the bracket at the rate indicated in
such table.
(4) The provisions of section 1 of the
Code. as amended by the Tax Reform
Act of 1969. and of this paragraph may
(ii) For taxable years beginning after

December 31. 1970. the tax imposed by
section 1(d). as amended by the Tax Reform Act of 1969. shall apply to the income effectively connected with the
conduct of a trade or business in the
United States by a married alien individual who is a nonresident of the
United States for all or part of the taxable year or by a foreign estate or
trust. For such years the tax imposed
by section 1(c). as amended by such
Act. shall apply to the income effectively connected with the conduct of a
trade or business in the United States
by an unmarried alien individual (other
157
1.1-2
be illustrated by the following examples:
taining to persons who are nationals

but not citizens at birth. e.g .. a person
born in American Samoa. see section
308 of such Act (8 U.S.C. 1408). For special rules applicable to certain expatriates who have lost citizenship with a
principal purpose of avoiding certain
taxes. see section 877. A foreigner who
has filed his declaration of intention of
becoming a citizen but who has not yet
been admitted to citizenship by a final
order of a naturalization court is an
alien.
Example 1. A. an unmarried individual. had

taxable income for the calendar year 1964 of
$15.750. Accordingly. the tax upon such taxable income would be $4.507.50. computed as
follows from the table in section 1(a)(1):
Tax on $14.000 (from table) ..............................
Tax on $1,750 (at 41 percent as determined
from the table) ........
......................
Total tax on $15,750 ......
$3,790.00
717.50
4,507.50
Example 2. Assume the same facts as in example (1). except the figures are for the calendar year 1965. The tax upon such taxable
income would be $4.232.50. computed as follows from the table in section 1(a)(2):
Tax on $14,000 (from table) ................................
from the table) ..................................................
$3,550.00
Total tax on $15,750 .............................
4,232.50
[T.D. 6500. 25 FR 11402. Nov. 26. 1960. as

amended by T.D. 7332. 39 FR 14216. Dec. 23.
1974)
682.50
(a) Taxable years ending before January 1, 1971. For taxable years ending be-
Example 3. Assume the same facts as in ex-
ample (1), except the figures are for the calendar year 1971. The tax upon such taxable
income would be $3.752.50. computed as follows from the table in section 1(c). as amended:
Tax on $14,000 (from table) ..............................
from the table) ..................................................
Total tax on $15,750 ......................
1.1-2 Limitation on tax.
fore January 1, 1971. the tax imposed by

section 1 (whether by subsection (a) or
subsection (b) thereof) shall not exceed
87 percent of the taxable income for the
taxable year. For purposes of determining this limitation the tax under
section 1 (a) or (b) and the tax at the
87-percent rate shall each be computed
before the allowance of any credits
against the tax. Where the alternative
tax on capital gains is imposed under
section 1201(b), the 87-percent limitation shall apply only to the partial tax
computed on the taxable income reduced by 50 percent of the excess of net
long-term capital gains over net shortterm capital losses. Where. for purposes of computations under the income averaging provisions. section
120l(bl is treated as imposing the alternative tax on capital gains computed
under section 1304(e)(2). the 87-percent
limitation shall apply only to the tax
equal to the tax imposed by section 1.
reduced by the amount of the tax imposed by section 1 which is attributable
to capital gain net income for the computation year.
$3,210.00
542.50
3.752.50
(b) Citizens or residents of the United

States liable to tax. In general. all citi-
zens of the United States. wherever

resident. and all resident alien individuals are liable to the income taxes imposed by the Code whether the income
is received from sources within or
without the United States. Pursuant to
section 876, a nonresident alien individual who is a bona fide resident of
Puerto Rico during the entire taxable
year is. except as provided in section
933 with respect to Puerto Rican source
income. subject to taxation in the
same manner as a resident alien individual. As to tax on nonresident alien
individuals. see sections 871 and 877.
(c) Who is a citizen. Every person born
or naturalized in the United States and
subject to its jurisdiction is a citizen.
For other rules governing the acquisition of citizenship. see chapters 1 and 2
of title III of the Immigration and Nationality Act (8 U.S.C. 1401-1459). For
rules governing loss of citizenship. see
sections 349 to 357. inclusive. of such
Act (8 U.S.C. 1481-1489). Schneider v.
Rusk. (1964) 377 U.S. 163. and Rev. Rul.
70-506. C.B. 1970-2. 1. For rules per-
(b) Taxable years beginning after December 31, 1970. If. for any taxable year
beginning after December 31. 1970. an

individual has earned taxable income
which exceeds his taxable income as
defined by section 1348. the tax imposed
by section 1. as amended by the Tax
Reform Act of 1969. shall not exceed
the sum computed under the provisions
10
158
..567
Jack Cole Company v. Alfred T. MacFarland, Commissioner, 206 Tenn. 694, 337
S.W.2d 453 (Tenn. 1960)
Supreme Court of Tennessee, at Nashville
June 6, 1960, Opinion Filed
COUNSEL:
Maclin P. Davis, Jr., Waller, Davis & Lansden, Nashville, for appellee.
George F. McCanless, Attorney General, Milton P. Rice and David M. Pack,
Assistant Attorneys General, for appellant.
JUDGES: Mr. Chief Justice Prewitt delivered the opinion of the Court.
OPINION:
This is a suit to recover $383.78, penalties and interest claimed to be due the
complainant as a tax paid under protest. This tax was paid pursuant to Chapter 252,
Public Acts of 1959, which was declared unconstitutional and void by the
Chancellor and this appeal by the State resulted.
It appears that complainant is engaged in the business of transporting freight
by motor truck in interstate commerce. Its activities in Tennessee are exclusively in
interstate commerce and it has never paid corporation excise or franchise taxes
under Chapters 27 and 29, Title 67, Tennessee Code. The complainant realizes net
earnings from transporting freight in Tennessee in interstate commerce. After the
enactment of Chapter 252, Public Acts of 1959, the State demanded the sum of
$383.78, penalties and interest.
On October 15, 1959, the complainant paid the tax, penalties and interest to
the defendant under protest and then brought this suit for the recovery of the
amount so paid as authorized by Section 67-2305, T.C.A. conceiving said
assessment and collection to be unjust and illegal on the ground that said statute is
unconstitutional and void.
The complainant claims that under Article II, Section 28, of the Constitution
of Tennessee, all property must be taxed according to its value, and taxes must be
equal and uniform throughout the State. The only exceptions relate to privilege
I
159
Sop
taxes on income derived from stocks and bonds that are not taxed ad valorem.
It is contended that a tax purporting to be on the privilege of owning
property or deriving income from property is, in substance and effect, a property
tax and not a privilege tax within Article II, Section 28.
The statute under which the tax here involved was assessed and collected
provides in part as follows:
"This tax shall not be construed as a tax on the privilege of carrying on
business in Tennessee, the same being upon the privilege of being in receipt
of or realizing net earnings in Tennessee * * *."
It appears from the foregoing quotation that the tax levied by Chapter 252 of the
Public Acts of 1959 undertakes to place a tax on income on net earnings in
Tennessee, and complainant contends that said Chapter 252 seeks to impose a tax
not authorized by but in violation of Article II, Section 28, of the Constitution of
Tennessee.
The particular portion of Section 28, Article II, involved is as follows:
"The Legislature shall have power to levy a tax upon incomes derived from
stocks and bonds that are not taxed ad valorem."
In the leading case of Evans v. McCabe, 164 Tenn. 672, 678, 52 S. W2d 159,
160, the Court stated:
"The language is, not that the Legislature shall levy a tax upon such
incomes, but shall have power to levy the tax.
"If the income tax is a property tax, the authority to discriminate between
incomes arising from particular stocks and bonds and incomes arising from
other sources makes of the income tax clause an exception to the equality
and uniformity clause. If the income tax is a privilege tax, the authority to
tax incomes upon prescribed conditions makes of the clause an exception to
the unconditional and unlimited authority to tax privileges generally.
***
"It therefore seems to us, treating the assailed tax as a property tax, upon
2
160
principles too well established by authority to be challenged, that when the

Constitution by way of exception to a general provision against inequality in
taxation conferred upon the Legislature the power to tax incomes of only
one class, that instrument necessarily denied to the Legislature the power to
tax incomes of other classes. * * * 11
11
* * * That section of the Constitution, however, only authorized the
Legislature to tax incomes in so far as they were 'derived from stocks and
bonds that are not taxed ad valorem.' If the Convention of 1870
contemplated an income tax as a privilege tax it must have included the
income tax clause as a limitation on the power to levy such a tax. From such
a viewpoint this clause is an exception or a proviso. The clause was
certainly not designed to confer an additional power of privilege taxation.
The preceding clause, in terms as broad as possible, had countenanced the
power of the Legislature to tax every privilege. The intent, however, was
that only the incomes mentioned should be taxed. 11
The defendant contends that the tax is a privilege tax because the Legislature
has designated the receipt or realizing of earnings or income as a privilege.
Defendant cites numerous cases supporting the contention that the Legislature can
name anything to be a privilege and then tax it.
It cannot be denied that the Legislature can name any privilege a taxable
privilege and tax it by means other than an income tax, but the Legislature cannot
name something to be a taxable privilege unless it is first a privilege.
In the present case the statute itself provides that the tax shall not be
construed as a tax on the privilege of carrying on a business in Tennessee, but
expressly provides that the tax shall be upon the privilege or being in receipt of or
realizing net earnings in Tennessee, which, it appears to us, is an income tax not
authorized by Article II, Section 28 of the Constitution above referred to.
Realizing and receiving income or earnings is not a privilege that can be
taxed.
A privilege is whatever business, pursuit, occupation, or vocation, affecting
the public, the Legislature chooses to declare and tax as such. 11 Corn et a/.
v. Fort, 170 Tenn. 377, 385, 95 S. W2d 620, 623, 106 A.L.R. 647.
11
"Privileges are special rights, belonging to the individual or class, and not to
the mass; properly, an exemption from some general burden, obligation or
3
161
duty; a right peculiar to some individual or body." Lonas v. State, 50 Tenn.

287, 307.
Since the right to receive income or earnings is a right belonging to every person,
this right cannot be taxed as privilege.
It results that we find no error in the decree of the Chancellor holding the
Act in question invalid and it is affirmed.
162
4954
INCOME, ESTATE AND GIFT TAX PROVISIONS
NTERNAL REVENUE
CODE
II
AS OF JUNE 25, 1973
CoMMERCE,
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,....,,~ CLEARING~
,,,,,,,,,,,,,,,,,,,,,,,,,,,................ HousE.,JNc.,
,,,,,,,,,,,,,,,,,,,,,...~ ,,,,........,.......,....~
PUB~ISHERS
of"
TOPICAL.
L..A.W
REP 0
R T
&
WASHINGTON
CHICAGO
NEW YORK
SAN FRANCISCO
LOS ANGELES
PHILADELPHIA
BOSTON
163
II
I
I
Crimes
5333-3
Subchapter A-Crimes
Part I.
Part II.
General provisions.
Penalties applicable to certain taxes.
PART I-GENERAL PROVISIONS

Sec.
Sec.
Sec.
Sec.
7201.
7202.
7203.
7204.
Sec. 7205.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
7206.
7207.
7208.
7209.
7210.
7211.
7212.
Sec.
Sec.
Sec.
Sec.
7213.
7214.
7215.
7216.
Attempt to evade or defeat tax.

Willful failure to collect or pay over tax.
Willful failure to file return, supply information, or pay tax.
Fraudulent statement or failure to make statement to employees.
Fraudulent withholding exemption certificate or failure to
supply information.
Fraud and false statements.
Fraudulent returns, statements, or other documents.
Offenses relating to stamps.
Unauthorized use or sale of stamps.
Failure to obey summons.
False statements to purchasers or lessees relating to tax.
Attempts to interfere with administration of internal revenue laws.
Unauthorized disclosure of information.
Offenses by officers and employees of the United States.
Offenses with respect to collected taxes.
Disclosure or use of information by preparers of returns.
[Sec. 7201]
SEC. 7201. ATTEMPT TO EVADE OR DEFEAT TAX.

Any person who willfully attempts in any manner to evade or defeat any tax
imposed by this title or the payment thereof shall, in addition to other penalties
provided by law, be guilty of a felony and, upon conviction thereof, shall be
fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.
Source: Sees. 145(a} (ln part), 145(b) (in
part). 153(d) (ln part), 340 (in part). 894
(b)(2}(B) On part), 894(b)(2)(C) (ln
part). 937 (ln part), 1024(a) On part).
1024(b), 1718(a) On part), 1718(b) On
part). 1821(a)(l) (ln part). 182l(a)(2)

On part), 182l(b)(4), 2557(b)(2) (in
part). 2557(b) (3) On part), 2656(!). 2707
(b) (in part), 2707(c) (in part), 3604(e)
<In part), 1939 Code.
[Sec. 7202)
SEC. 7202. WILLFUL FAILURE TO COLLECT OR PAY OVER TAX.

Any person required under this title to collect, account for, and pay over
any tax imposed by this title who willfully fails to collect or truthfully account
for and pay over such tax shall, in addition to other penalties provided by Jaw,
be guilty of a felony and, upon conviction thereof, shall be fined not more than
$10,000, or imprisoned not more than 5 years, or both, together with the costs
of prosecution.
Source: Sees. 145(b) On part}, 894(b}(2)
(C) (ln part), 1718(b) On part), 1821(a)
(2) (In part), 2557(b)(3) On part), 2707

<c> On part), 1939 Code.
[Sec. 7203]
SEC. 7203. WILLFUL FAILURE TO FILE RETURN, SUPPLY INFORMATION, OR PAY TAX.
Any person required under this title to pay any estimated tax or tax. or
required by this title or by regulations made under authority thereof to make
a return (other than a return required under authority of section 6015), keep any
records, or supply any information, who willfully fails to pay such estimated tax
or tax, make such return, keep such records, or supply such information, at the
time or times required by law or regulations, shall, in addition to other penalties
16 4
Internal Revenue Code
See. 7203
5334
1954 Code-Subtitle F. Ch. 754. Part I
provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall

be fined not more than $10,000, or imprisoned not more than 1 year, or both,
together with the costs of prosecution.
Source: Sees. 145(a), 154(d). 340, 894(b)(2)(B), 937, 1024(a), 1718(a), 182l(a)(1), 2557
(b) (2), 2707(b), 3604(c). 1939 Code.
after "section 6015'" in the third line.
See. as
Amendments:
amended effective:
Effective with respect to taxable years
beginning after December 31, 1967.
P. L. 90-364. 103(e) (5)
1-1-68
P. L. 90-364, 103(e) (5):
Amended Code Sec. 7203
by deleting 'or
section 6016" which formerly appeared
SEC. 7204. FRAUDULENT STATEMENT OR FAILURE TO MAKE

STATEMENT TO EMPLOYEES.
In lieu of any other penalty provided by law (except the penalty provided
by section 6674) any person required under the provisions of section 6051 to
furnish a statement who willfully furnishes a false or fraudulent statement or
who willfully fails to furnish a statement in the manner, at the time, and showing
the information required under section 6051, or regulations prescribed thereunder,
shall, for each such offense, upon conviction thereof, be fined not more than
$1,000, or imprisoned not more than 1 year, or both.
Source: Sec. 1634(a), 1939 Code, substantially unchanged.
SEC. 7205. FRAUDULENT WITHHOLDING EXEMPTION CERTIFICATE OR FAILURE TO SUPPLY INFORMATION.

Any individual required to supply information to his employer under section
3402 who willfully supplies false or fraudulent information, or who willfully
fails to supply information thereunder which would require an increase in the
tax to be withheld under section 3402, shall, in lieu of any other penalty provided by law (except the penalty provided by section 6682), upon conviction
thereof, be fined not more than $500, or imprisoned not more than 1 year, or both.
Source: Sec. 1626(d), 1939 Code, substantially unchanged.
Sec. as
"any other penalty provided by law (exAmendments:
amended effective:
cept the penalty provided by section 6682)"
for "any penalty otherwise provided", efP. L. 89-368. 101(e) ...
fective with respect to remuneration paid
after April 30, 1966.
P. L. 89-368, 101(e) :
Amended Code Sec. 7205 by substituting
"3402" for "3402(!)" and by substituting
SEC. 7206. FRAUD AND FALSE STATEMENTS.

Any person who(1) DECLARATION UNDER PENALTIES OF PERJURY.-Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury,
and which he does not believe to be true and correct as to every material
matter; or
Source: Sec. 3809(a), 1939 Code.
(2) Am OR ASSISTANCE.-Willfully aids or assists in, or procures, counsels,
or advises the preparation or presentation under, or in connection with any
matter arising under, the internal revenue laws, of a return, affidavit, claim,
or other document, which is fraudulent or is false as to any material matter,
whether or not such falsity or fraud is with the knowledge or consent of
the person authorized or required to present such return, affidavit, claim, or
document; or
Source: Sec. 3793(b), 1939 Code.
(3) FRAUDULENT BONDS, PERMITS, AND ENTRIES.-Simulates or falsely or
fraudulently executes or signs any bond, permit, entry, or other document
required by the provisions of the internal revenue laws, or by any regulation
Sec.7204
165
1972, Commerce Clearing House, Inc.
5153
Subtitle F-Procedure and Administration

Chapter
Chapter
Chapter
Chapter
Chapter
Chapter
Chapter
Chapter
61.
62.
63.
64.
65.
66.
67.
68.
Chapter 69.
Chapter 70.
Chapter 71.
Chapter 72.
Chapter 73.
Chapter 74.
Chapter 75.
Chapter 76.
Chapter 77.
Chapter 78.
Chapter 79.
Chapter 80.
Information and returns.

Time and place for paying tax.
Assessment.
Collection.
Abatements, credits, and refunds.
Limitations.
Interest.
Additions to the tax, additional amounts, and assessable
penalties.
General provisions relating to stamps.
JeopardY, bankruptcy and receiverships.
Transferees and fiduciaries.
Licensing and registration.
Bonds.
Closmg agreements and compromises.
Crimes, other offenses, and forfeitures.
Judicial proceedings.
Miscellaneous provisions.
Discovery of liability and enforcement of title.
Definitions.
General rules.
CHAPTER 61-INFORMATION AND RETURNS

SuBcHAPTER A.
SuncHAPTER B.
Returns and records.

Miscellaneous provisions.
Subchapter A-Returns and Records

Part
I.
Part II.
Part III.
Part IV.
Part v.
Part VI.
Part VII.
Records, statements, and special returns.

Tax returns or statements.
Information returns.
Signing and verifying of returns and other documents.
Time for filing returns and other documents.
Extension of time for filing returns.
Place for filing returns or other documents.
PART I-RECORDS, STATEMENTS, AND

SPECIAL RETURNS
Sec. 6001. Notice or regulations requiring records, statements, and special
returns.
[Sec. 6001]
SEC. 6001. NOTICE OR REGULATIONS REQUIRING

STATEMENTS, AND SPECIAL RETURNS.
RECORDS,
Every person liable for any tax imposed by this title, or for the collection
thereof, shall keep such records, render such statements, make such returns, and
comply with such rules and regulations as the Secretary or his delegate may from
time to time prescribe. Whenever in the judgment of the Secretary or his delegate
it is necessary, he may require any person, by notice served upon such person or
by regulations, to make such returns, render such statements, or keep such records, as the Secretary or his delegate deems sufficient to show whether or not
such p_erson is liable for tax under this title.
Source: Sees. 51, 54(a), (b), 82l(d), 1007
(a), (b), 1720, 1835, 1928(b), 2302(c),
2303(c), 2322(c), 2324, 2352(c), 2555, 2569
(d), 2594(a). 2653(b), 2709, 2724, 3220(e),

3233(a), 3603, 1939 Code, substantially
unchanged.
166
Sec. 6001
5 I 5 3 2
19 54 Code-Subtitle F. Ch. 61 A. Part DA

PART II-TAX RETURNS OR STATEMENTS
Subpart A. General requirement.

Subpart B. Income tax returns.
Subpart C. Estate and gift tax returns.
Subpart D. Miscellaneous provisions.
Subpart A-General Requirement

Sec. 6011.
General requirement of return, statement, or Jist.

[Sec. 6011]
SEC. 6011.
GENERAL REQUIREMENT
OR LIST.
OF RETURN, STATEMENT,
[Sec. 601l(a)]
(a) GENERAL RuLE.-When required by regulations prescribed by the Secretary
or his delegate any person made liable for any tax imposed by this title, or for
the collection thereof, shall. make a return or statement according to the forms
and regulations prescribed by the Secretary or his delegate. Every person required to make a return or statement shall include therein the information required
by such forms or regulations.
Source: Sees. 47(a), 51 (In part), 143(c)
(In part), 215(a) (in part), 217 (in part).
235 (in part). 251(g) On part), 1420(c)
(In part), 1530(b) (ln part), 1604(a) (in
part), 1642 (in part), 1700(c)(2) (in
part), 1700(d)(2) (ln part), 1700(e)(2)
(In part), 1716(a) (in part), 1852(a) On
part), 1902(a)(l) On part), 2403(a)
(In part), 2451(a) (in part), 2471 (In

part), 2701 (In part), 3272(a) (In part),
3310(a) and (b) (in part), 3310(0 (1)
On part), 3448(a) (ln part). 3461 (In
part), 3467(b) (In part). 3469(d) (In
part),
3475(c)
(In
part),
3491(a)
(In part), 3611(a) (1) (In part), 1939
Code.
[Sec. 601l(b)]
(b) IDENTIFICATION OF TAXPAYER.-The Secretary or his delegate is authorized
to require such information with respect to persons subject to the taxes imposed
by chapter 21 or chapter 24 as is necessary or helpful in securing proper identification of such persons.
Source: New.
[Sec. 6011 (c)-Repealed]
[~Caution:
Section 6011( c) was repealed, eRective 6-22-65,

by P. L. 89-44, Sec. 101(b)(6).]
Sec. as
Amendments:
amended effective:
P. L. 89-44. 10l(b)(6)
6-22435
P. L. 85-859, 161. . . .
1-1-59
P. L. 89-44, 10l(b) (6):
Repealed Sec. 60ll(c) which read as

follows:
"(c) Return o! Retailers Excise Taxes
by Suppliers."(1) General
rule.-Under regulations
prescribed by the Secretary or his delegate. the Secretary or his delegate may
enter into an agreement with any supplier
with respect to any retailers excise tax
Imposed by chapter 31 (not Including the
taxes imposed by section 4041), whereby
such supplier will be liable to return and
pay such tax (for the period tor which
such agreement is In effect) !or the person who (without regard to this subsection) Is required to return and pay such
tax. Except as provided In the regulations
prescribed under this subsection-
See. EOll(a)
167
"(A) all provisions of Jaw (including

penalties) applicable in respect of the person who (without regard to this subsection) is required to return and pay the
tax shall apply to the supplier entering
Into the agreement. and
"(B) the person who (without regard to
this subsection) is required to return and
pay such tax shall remaln subject to all
provisions ot Jaw (including penalties)
applicable in respect ot such person.
"(2) Limitations on agreement authority
in the case o! house-to-house salesmen.In the case ot sales. by house-to-house
salesmen. o! articles subject to tax under
chapter 31 (other than section 4041) which
are supplied by a manufacturer or distributor. i! the manufacturer or distributor
establishes the retail list price at which
such articles are to be sold, the Secretary
or his delegate shall not, as a condition to
entering into an agreement under paragraph (1). require-"(A) that such house-to-house salesmen
exccute powers o! attorney making such
Returns-Income Tax
manufacturer or distributor an agent for
the return and payment of such tax,
"(B) that the manufacturer or distributor make separate returns with respect to
each such house-to-house salesman, or
"(C) that the manufacturer or distributor assume any liability for tax on articles
5153-3
supplied by any person other than such

manufacturer or distributor."
P. L. 85-859, 161:
Redesignated subsection (c) of Sec. 6011

as subsection (d) and added new subsection (c) to read as above.
[Sec. 6011 (d) J

(d) INTEREST EQU.\l.IZATION TAX RETURNS, ETC.(!) IN GENERA!..( A) Every person shall make a return for each calendar quarter
during which he incurs liability for the tax imposed by section 4911,
or would so incur liability but for the provisions of section 4918. The
return shall, in addition to such other information as the Secretary or
his delegate may by regulations require, include a list of all acquisitions
made by such person during the calendar quarter for which exemption
is claimed under section 4918 accompanied by a copy of any return made
during such quarter under subparagraph (D). No return or accompanying eYidence shall be required under this paragraph, in connection with
any acquisition with respect to ''"hich-
(i) an lET clean confirmation is obtained in accordance with

the provisions of section 4918(b),
(ii) a Yaliclation certificate described in section 4918(b) issued
to the person from whom such acquisition was made is obtained,
and such certificate was filecl in accordance with the requirements
prescribed by the Secretary or his delegate, or
(iii) a validation certificate was obtained by the acquiring person after such acquisition and before the date prescribed by section
6076(a) for the filing of the return,
nor shall any such acquisition be required to be listed in any return made
under this paragraph.
( I3) Enry person "ho incms liability for the tax imposed by section 4911 shall, if he disposes of the stock or debt obligation with respect
to which such liability was incurred prior to the filing of the return
required by subparagraph (A) (unless such disposition is made under circumstances which entitle such person to a credit under the provisions of
section 4919), make a return of such ta.x.
(2) INFORMATION RETURNS OF COMMERCIAL BANKS.-Every United States
person (as defined in section 4920 (a) ( 4)) which is a commercial bank shall
file a return with respect to loans and commitments to foreign obligors at
such times, in such manner, and setting forth such information as the Secretary or his delegate shall by forms and regulations prescribe.
(J) REPORTING REQUIREMENTS FOR CERTAIN MEMBERS OF EXCHANGES AND
ASSOCIATIONs.-Every member or member organization of a national securities
exchange or of a national securities association registered with the Securities
and Exchange Commission, which is not subject to the provisions of section
4918(c), shall keep such records and file such information as the Secretary
or his delegate may by forms or regulations prescribe in connection with
acquisitions and sales effected by such member or member organization, as a
broker or for his own account, of stock of a foreign issuer or debt obligations
of a foreign obligor(A) with respect to which a validation certificate described in section 4918(b)(l)(A) has been received by such member or member
organization; or
(B) with re~pect to which an acquiring United States person is
subject to the tax imposed by section 4911.
168
Sec. 6011 (d)
5 IS 4
1954 Code-Subtitle F. Ch. &lA. Part II.B.
Amendments:
stock or debt obligation or a blanket certificate of American ownership with respect

to the account from which such stock or
debt obligation was sold.
Sec. as
amended effective:
P. L. 91-128. 4(!),
4(g)
............. .
P. L. 90-59, 4(b) .... .
P. L. 88-563, 3(a) ... .
P. L. 90-59, 4(b):
Amended Code Sec. 601l(d) (1) to read

as above, effective with respect to acquisitions of stock and debt obligations made
after July 14. 1967. Prior to amendment,
Sec. 60ll(d) (1) read as follows:
"(1) IN GENERAL.-Every person shall
make a return for each calendar quarter
during which he Incurs llabllity for the tax
Imposed by section 4911, or would so Incur
liability but for the provisions of section
4918. The return shall, In addition to such
other information as the Secretary or his
delegate may by regulations require, Include a list of all acquisitions made by such
person during the calendar quarter which
are exempt under the provisions of section
4918, and shall, with respect to each such
acquisition, be accompanied either (A) by
a certificate of American ownership which
complies with the provisions of section
4918(e), or (B) In the case of an acquisition for which other proof of exemption Is
permitted under section 4918(!), by a statement setting forth a summary of the evidence establishing such exemption and the
reasons for the person's inability to establish prior .American ownership under subsection (b), (c) or (d) of section 4918.
No return or acCompanying evidence shall
be required under this paragraph In connection with any acquisition with respect
to which a written confirmation, furnished
In accordance with the requirements described In section 4918(c) or (d). is treated
as conclusive proof of prior American ownership: nor shall any such acquisition be
required to be listed In any return made
under this paragraph."
P. L. 91-128, 4(f), 4(g):
P. L. 91-128, 4(!), amended Code Sec.

60ll(d) (1)(B) by Inserting "(unless such
disposition Is made under circumstances
which entitle such person to a credit under
the provisions of section 4919)" after "subparagraph (A)."
P. L. 91-128, 4(g), amended Code Sec.
60ll(d) (3) to read as above. effective with
respect to acquisitions made after November 26, 1969. Prior to amendment, Code
Sec. 6011(d)(3) read as follows:
(3) Reporting requirements for members
of exchanges and assoclatlons.-Every
member or member organization of a national securities exchange or of a national
securities association registered with the
Securities and Exchange Commission shall
keep such records and file such information as the Secretary or his delegate may
by regulations prescribe in connection with
acquisitions and sales e:trected by such
member or member organization as a
broker, and acquisitions made for the account of such member or member organization, of stock or debt obllgations(A) as to which a certificate of American
ownership or blanket certificate of American ownership is executed and filed with
such member or member organization as
prescribed under section 4918(e) ; and
(B) as to which a written confirmation
Is furnished to a United States person stating that the acqulsition-
P. L. 88-563, 3(a):
Added Code Sec. 6011(d) and redesignated former Sec. 6011(d) as 6011(e).
The first period for which returns shall be
made shall be the period commencing July
19, 1963, and ending at the close of the
calendar quarter in which the enactment
of this Act occurs, September 2, 1964.
(1) in the case of a transaction on a national securities exchange, was made subject to a special contract, or
(II) in the case of a .transaction not on
a national securities exchange, was from a
person who had not filed a certificate of
American ownership with respect to such
[Sec. 60ll(e)]
(e) RETURNS, ETc., OF DISCS AND FoRMER DISCS.(1) REcoRDs AND INFORMATION.-A DISC or former DISC shali for
the taxable year(A) furnish such information to persons who were shareholders
at any time during such taxable year, and to the Secretary or his
delegate, and
(B) keep such records, as may be required by regulations prescribed by the Secretary or his delegate.
(2) RETURNS.-A DISC shall file for the taxable year such returns as
may be prescribed by the Secretary or his delegate by forms or regulations.
Sec. as
Amendments:
amended effective:
P. L. 92-178, 504(a) ..
P. L. 92-178, 504 <a> :

Added new Code Sec. 6011(e) and redesignated former Code Sec. 6011(e) to be
Code Sec. 6011((). Effective date Is governed by the effective date for Code Sec.
992.
Sec. 60 II (e)
169
Returns-Income Tax
5155
[Sec. 6011()]
(f) INCOME, EsTATE, AND GIFT TAxEs.For requirement that returns of income, estate, and gift taxes be made
whether or not there is tax liability, see sections 6012 to 6019, inclusive.
Sec. as
Amendments:
amended effective:
P. L. 92-178. 504(a) ..
P. L. 88-563, 3(a) .. ..
P. L. 85-859, 161 .... .
1-1-59
P. L. 92-178, 504(a.):
Prior to redeslgnatlon by 504(a), subsection (f) of Code Sec. 6011 was subsection (e).
P. L. 88-563, 3(a):
Prior to redesignat!on by 3(a), subsection (e) of Sec. 6011 was subsection (d).
P. L. 85-859, 161:
Prior to redes!gnat!on by 161, subsection (d) of Sec. 6011 was subsection (c).
Subpart B-Income Tax Returns

Sec. 6012. Persons required to make returns of income.
Sec. 6013. Joint returns of income tax by husband and wife.
Sec. 6014. Income tax return-tax not computed by taxpayer.
Sec. 6015. Declaration of estimated income tax by individuals.
Sec. 6017. Self-employment tax returns.
Sec. 6017 A. Place of residence.
[Sec.6012]
SEC. 6012. PERSONS REQUIRED TO MAKE RETURNS OF INCOME.
[Sec.6012(a)]
(a) GENERAL RuLE.-Returns with respect to income taxes under subtitle A
shall be made by the following:
(1) (A) Every individual having for the taxable year a gross income of
$750 or more, except that a return shall not be required of an individual
(other than an individual referred to in section 142(b) ) (i) who is not married (determined by applying section 143 (a))
and for the taxable year has a gross income of less than $2,050, or
(ii) who is entitled to make a joint return under section 6013
and whose gross income, when combined with the gross income of
his spouse, is, for the taxable year, less than $2,800 but only if SU(:h
individual and his spouse, at the close of the taxable year, had the
same household as their home.
Clause (ii) shall not apply if for the taxable year such spouse makes a
separate return or any other taxpayer is entitled to an exemption for
such spouse under section 151 (e).
(B) The $2,050 amount specified in subparagraph (A)(i) shall be
increased to $2,800 in the case of an individual entitled to an additional
personal exemption under section 151(c)(l), and the $2,800 amount
specified in subparagraph (A) (ii) shall be increased by $750 for each
additional personal exemption to which the individual or his spouse is
entitled under section 151 (c);
('C) Every individual having for the taxable year a gross income of
$750 or more and to whom section 141(e) (relating to limitations in
case of certain dependent taxpayers) applies;
(2) Every corporation subject to taxation under subtitle A;

(3) Every estate the gross income of which for the taxable year is $600
or more;
(4) Every trust having for the taxable year any taxable income, or
having gross income of $600 or over, regardless of the amount of taxable
income; and
(5) Every estate or trust of which any beneficiary is a nonresident alien;
170
Sec. 6012(a)
1
51 58
1954 Code-Subtitle F, Ch. 61.11, Part JIB
(1) no joint return shall be made if either the husband or wife at any
time during the taxable year is a nonresident alien;
(2) no joint return shall be made if the husband and wife have different
taxable years; except that if such taxable years begin on the same day and
end on different days because of the death of either or both, then the joint
return may be made with respect to the taxable year of each. The above
exception shall not apply if the surviving spouse remarries before the close of
his taxable year, nor if the taxable year of either spouse is a fractional part
of a year under section 443 (a) ( 1);
(3) in the case of death of one spouse or both spouses the joint return
with respect to the decedent may be made only by his executor or administrator; except that in the case of the death of one spouse the joint return
may be made by the surviving spouse with respect to both himself and the
decedent if no return for the taxable year has been made by the decedent, no
executor or administrator has been appointed, and no executor or administrator is appointed before the last day prescribed by law for filing the return
of the surviving spouse. If an executor
administrator of the decedent is
appointed after the making of the joint return by the surviving spouse, the
executor or administrator may disaffirm such joint return by making, within
1 year after the last day prescribed by law for filing the return of the surviving spouse, a separate return for the taxable year of the decedent with
respect to which the joint return was made, in which case the return m?.de
by the survivor shall constitute his separate return.
ot
Source: Sec. 51(b), 1939 Code.
[Sec. 6013(b)]
(b) JorNT RETuRN AFTER FILING SEPARATE RETURN.(1) IN GENERAL.-Except as provided in paragraph (2), if an individual has
filed a separate return for a taxable year for which a joint return could have
been made by him and his spouse under subsection (a) and the time prescribed by law for filing the return for such taxable year has expired, such
individual and his spouse may nevertheless make a joint return for such taxable year. A joint return filed by the husband and wife under this subsection
shall constitute the return of the husband and wife for such taxable year, and
all payments, credits, refunds, or other repayments made or allowed with
respect to the separate return of either spouse for such taxable year shall be
taken into account in determining the extent to which the tax based upon the
joint return has been paid. If a joint return is made under this subsection,
any election (other than the election to file a separate return) made by either
spouse in his separate return for such taxable year with respect to the treatment of any income, deduction, or credit of st1ch spouse shall not be changed
in the making of the joint return where such election wonlcl have been irrevocable if the joint return had not been made. If a joint return is made
under this subsection after the death of either spouse, such return with respect to the decedent can be made only by his executor or administrator.
(2) LIMITATIONS FOR MAKING OF ELECTION.-The election provided for in
paragraph (1) may not be made( A) unless there is paid in full at or before the time of the filing of
the joint return the amount shown as tax upon such joint return; or
(B) after the expiration of 3 years from the last date prescribed by
law for filing the return for such taxable year (determined without regard
to any extension of time granted to either spouse); or
(C) after there has been mailed to either spouse, with respect to
such taxable year, a notice of deficiency under section 6212, if the spouse,
as to such notice, files a petition with the Tax Court of the United States
within the time prescribed in section 6213; or
S ec.
(D) after either spouse has commenced a suit in any court for the
recovery of any part of the tax for such taxable year; or
60l3fb)
111
51
INTERNAL REVENUE CODE

Income, Estate, Gift, Employment and Excise Taxes,
including Procedural and Administrative Provisions
As of June 3, 1991
In Two . Volumes
Volume One
Income Taxes 1-999
CCH Tax Law Staff Publication
COMMERCE,
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, ,,~ CLEARING~
''''''''''''''''''''''''''''''"" HOUSE,,
,,,,,,,,,,,,,,,,,,,,,,,... INC.,
,,,,,,,,,,,,
.....
.....
Setting the standard since 1913

4025 \Nest Peterson Avenue Chicago, Illinois 60646
172
1
I1
Closing agreements, compromises
Code Sec. 7122(d)(l)

tion 6159 before such rejection is communicated to the
taxpayer; and
(2) which allow a taxpayer to appeal any rejection of such
offer or agreement to the Internal Revenue Service Office
of Appeals.
.IJJ 1!198, P.L. 105-206, Sec. 3462(a), added subsec. (c) ... Sec.
3462(c)(l), added subsec. (d), effective for proposed offers-in-<:<>m
promise and installment agreements submitted after 7/22198.

In 1996, P.L 1~168. Sec. 503(a), substituted "$50,000. However,
such compromise shall be subject to continuing quality review by
the Secrewy." for "$500." in subsec. (b), effective 7/30196.
In 1976, P.L 94-455, Sec. 1906(b)(l3)(A). substituted "Secretary"
for "Secrewy or his delegate" each p_lacc it appealed in Code Sec.
7122. effective VIm.
Sec. 7123. Appeals dispute resolution procedures.

(a) Early referral to appeals procedures.
The Secretary shall prescribe procedures by which any
taxpayer may request early referral of 1 or more unresolved
issues from the examination or collection division to the Internal Revenue Service Office of Appeals.
(b) Alternative dispute resolution procedures.
(1) Mediation. The Secretary shall prescribe procedures
under which a taxpayer or the Internal Revenue Service
Office of Appeals may request non-binding mediation on
any. issue unresolved at the conclusion of"'(A) appeals procedures; or
' (B) unsuccessful attempts to enter into a closing agreement under section 7121 or a compromise under section
7122_
(2) Arbitration. The Secretary shall establish a pilot program under which a taxpayer and the Internal Revenue
Service Office of Appeals may jointly request binding arbitration on any issue unresolved at the conclusion of(A) appeals procedures; or
(B) unsuccessful attempts to enter into a closing agreement under section 7121 or a compromise under section
7122-. . .
. In 1!198, P.L 105-206, Sec. 3465(a)( I), added Code Sec. 7123, effective 7122/98.
-P.L IOS-206, Sec. 3465(b) and (c), of Ibis Act. reads as follows:
"(b) Appeals officers in each State. The Commissioner of Internal Revenue shall ensure that an appeals officer is regularly availa
ble within each S!ate.
"(c) Appeals videoconferencing alternative for rural areas. The
Commissioner of Internal Revenue shall consider the use of the
videoconferencing of appeals conferences between appeals officers
and taxpayers seeking appeals in rural or remote areas."
Subchapter A.-Crimes
Pan
I. General provisions.
IT. Penalties applicable to certain taxes .
PART I.-GENERAL PROVISIONS
Sec.
7201. Attempt to evade or defeat tax.
72()2. Willful failure to collect or pay over tax.
7203. Willful failure to file return, supply information, or
pay tax.
7204. Fraudulent statement or failure to make statement to
employees.
7205. Fraudulent withholding exemption certificate or failure to supply information.
7206. Fraud and false statements.
72CJ7. Fraudulent returns, statements, or other documents.
7208. Offenses relating to stamps.
7209. Unauthorized use or sale of stamps.
7210. Failure to obey summons.
7211. False statements to purchasers or lessees relating to
'
faX_
,..
7212. Attempts. to interfere with. administration of internal

..
. revenue laws.
7213. Unauthorized disclosure of information.
7213A. Unauthorized inspection of returns or return information.
7214. Offenses by officers and employees of the United
States.
7215. Offenses with respect to collected taxes.
7216. Disclosure or use of information by preparers of returns.
7217. Prohibition on executive branch influence over taxpayer audits and other investigations .
7217. Repealed.
In 1!198, P.L. 105-206, Sec. 1105(b), added item 7217.
1n 1m, P.L. 105-35.
2(bX2>. added item 7213A
In 1982, P.L 97-248, Sec. 357(b)(2), deleted item 7217.
Prior to deletion item 7217 read as follows:
"7217. Civil damages for unauthorized disclosure of returns andreturn infonnation...
In 1976, P.L 94-455, Sec. 1202(e)(2), added item 7217.
In 1971, P.L 92-178. Sec. 316(b), added item 7216.
In 1958, P.L. 85-321, added item 7215. (Chapter 78 is effective as
set forth in Code Sec. 7851(a)(6)).
sec:.
Sec. 7124. Cross references.

For criminal penalties for concealment of propeny, false
statement, or falsifying and destroying records, in connection
with any closing agreement, compromise, or offer of compromise, see section 7206.
In 1!198, P.L 105-206, Sec. 3465(a)(l), redesignated Code Sec.
7123 as Code Sec. 7124, effective 7122/98.
In 1982, P.L 97-258, Sec. 3(1)(12), deleted "(a) Criminal penalties{.)" and repealed subsec. (b), effective 9/13182.
Prior to repeal, subsec. (b) read as follows:
"(b) Compromises .tl1!r judgmenc. For compromises after judgment.
- R.S. 3469 (31 u.s.c. 194)."
CHAPTER 7S.:_CRIMES, OTHER OFFENSES AND

FORFEITURES
Subchapter
A. Crimes.
B- Other offenses.
C. Forfeitures.
Sec. 7201. Attempt to evade or defeat tax.

Any person who willfully attempts in any manner to
evade or defeat any tax imposed by this title or the payment
thereof shall, in addition to other penalties provided by law,
be guilty of a felony and, upon conviction thereof, shall be
fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.
In 1982, P.L 97-248. Sec. 329(a), substituted "$100,000 (SSOO.OOO
in the case of a ccrpoation)" f< "$10,000" in Code Sec. 7201, effective for offenses committed after 9/3182.
Sec. 7202. Willful failure to collect or pay over tax.

Any person required under this title to collect, account for,
and pay over any tax imposed by this title who. willfully
fails to collect or truthfully account for and 'pay ovef such
tax shall, in addition to other penalties provided by law, be
9,334
D. Miscellaneous penalty and forfeiture provisions.
174
.sl
Crimes and forfeitures
COde .Sec. 7206(5)(B)
guilty of a felony and, upon conviction thereof, shall be

fined not more than $10,000, or imprisoned not more than 5
years, or both, together with the costs of prosecution.
Sec. 7203. Willful failure to file return, supply information, or pay tax.
Any person required under this title to pay any estimated
tax or tax, or required by this title or by regulations made
under authority thereof to. make a return, keep any records,
or supply any information, who willfully fails to pay such
estimated tax or tax, make such return, keep such records, or
supply such information, at the time or times required by
law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000
in the case of a corporation), or imprisoned not more than I
year, or both, together with the costs of prosecution. In the
case of any person with respect to whom there is a failure to
pay any estimated tax, this section shall not apply to such
person with respect to such failure if there is no addition to
tax under section 6654 or 6655 with respect to such failure.
In the case of a willful violation of any provision of section
60501, the first sentence of this section shall be applied by
substituting "felony" for "misdemeanor" and "5 years" for
"I year".
'
'
In 1990, P.L. 101-647. Sec. 3303(a), substitut<1 "by substituting

'felony' for 'misdemeanor' and" for "by substituting" in the last
sentence of Code Sec. 7203, effective for actions and failures to act
occuning after 11129190.
In 1988, P.L. 100-690, Sec. 7601(a)(2XB), added lbe last sentence
of Code Sec. 7203, effcclive for actions after ll/18188.
In 1984, P.L. 98-369, Sec. 412(b)(9). dele~<~ "(other than a return
required under authority of section 6015)" after "to make a return"
in Code Sec. 7203, etr.ctive for tax. yrs. begin. after 12131/84.
In 1!182, P.L. 97-248. Sec. 327. added lbe last sentence to Code
Sec. 7203, effective 9/3182.
-P.L. 97-248, Sec. 329(b), substituted "$25.000 ($100,000 in lbe
case of a corporation)" for "$I 0,000" in Code Sec. 7203, effective
for offenses committed after 913182.
In 1968,P.L: 90-364, Sec. 103, deleled or section 6016" .at end
of porenlbelical phrase, effective for tal<. yrs. begin, after 12131/67.
.For special provision on effcclive date, sec Sec. 104 of the P. L.
~produced after Code Sec. 6425.
Sec. 7204. . Fraudulent statement or failure to make

''statement to employees.
In lieu of any other penalty provided by law (except the
penalty provided by section 6674) any person required under
the provisions of section 6051. to furnish a statement who
willfully furnishes a false or fraudulent statement or who
willfully fails to furnish a statement in the -manner, at the
time, and showing the information required under section
6051, or regulations prescribed thereunder, shall, for each
such offense, upon conviction thereof, be fined not more
than $1,000, or imprisoned not more than I year, or both.
Sec. 7205. Fraudulent withholding exemption certificate
or failure to supply information.
(a) Withholding on wages.
Any individual required to supply information to his employer under section 3402 who willfully supplies false or
fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the
tax to be withheld under section 3402, shall, in addition to
any other penalty provided by law, upon conviction thereof,
be fined not more than $1,000, or imprisoned not more than
I year, or both.
(b) Backup withholding on interest and dividends.
If any individual willfully makes a false certification
under paragraph (1) or (2)(C) of section 3406(d), then such
individual shall, in addition to any other penalty provided by
law, upon conviction thereof, be fmed not more than $1,000,

or imprisoned not more than 1 year; or both.
Ia 19119, PL. 101239, Sec:. 771J(b)(2). ameaded subsec. (b). effec
live for returns and Slatements the due dale for which (determined
without regard !0 extensiolls) is after 12131189.
Prior to amc:ndment subsec. (b) read as follows:

"(b) Backup wilbbolding on inttnst and dividends.
"If any individual willfully makes"(I) any false cenif!Calion or affinaalion on any sratemcnt required by a payor in order to meet lbe due dilisence requirements
of scc:tion 6676(b), or
"(2) a false cenilic:alion under paragnpb (I) or (2)(C) of scclion
3406(d),
.
then such individual shall. in addition to any other penalty provided
by law, upon conviction thereof, be fined not more than $1,000, or
imprisoned .not more lhaR I year. or both."
In 1984, P.L 98-369. Sec. IS9(a)(l). and (2). subslitut<1 "in addi
lion to" for "in lieu or each place it appeared in Code Sec. 7205.
and dele~<~ "(except the penalty provided by xction 6682)" each
place it appeared in Code Sec. 1205. efl'eclive for actions and failures to act occuning after 1118184.
In 1983, P.L. 98-67, Sec. 107(b)(l), substituted "(a) Withholding
on wages. Any individual"' for "Any individual" in Code Sec.
Sec. 107(bX2). added subsec. (b). effective 8/S/83.
In 1981, P.L. 97-34. Sec. 721(b), substituted "$1.000" for "SSOO".
effective for acts and failures to act after 12131181.
In 1%6, P.L 89-368. substituted "3402" for "3402(f)", and substitut<1 "other penalty provided by law (except the penalty provided in section 6682)" for "penalty otherwise provided ...
nos .. .
Sec. 7206. Fraud and false statements.

Any person who(1) Declaration under penalties of perjury. Willfully
makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and
which he does not believe to be true arid correct as to
every material matter; or
(2) Aid or assistance. Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation
under, or in cormection with any matter arising under, the
internal revenue laws, of a return, affidavit, claim, or other
document, which is fraudulent or is false as to '31\ymaterial inattei:, whether or not such falsity or fraud is with the
knowledge or consent of the person authorized or required
to present such return, affidavit, claim, or document; or
(3) FraudulenfbOnds, permits, and entrl~ Sililulates or
falsely or.fraudulently executes or signs any bond, permit,
entry, or other document required by the provisions of the
internal revenue laws, or by any regulation made in pursuance thereof, or procures the same to be falsely or fraudulently executed, or advises, aids in, or connives at such
execution thereof; or
(4) Removal or concealment with intent to defraud.
Removes, deposits, or conceals, or is concerned in removing, depositing, or concealing, any goods or commodities
for or in respect whereof any tax is or shall be imposed,
or any property upon which levy is authorized by section
6331, with intent to evade or defeat the assessment or collection of any tax impo~ed by this title; or
(5) Compromises and closing agreements. In connection
with any compromise under section 7122, or offer of such
compromise, or in connection with any closing agreement
under section 7121, or offer to enter into any such agreement, willfully(A) Concealment of property. Conceals from any officer
or employee of the United States any property belonging to the estate of a taxpayer or other person liable in
respect of the tax, or
(B) Withholding, falsifying, and destroying records. Receives, withholds, destroys, mutilates, or falsifies any
book, document, or record, or makes any false state-
175
9,335
~rmation
Subtitle
and 'returns
K~Proced,ore
and Administration
Chapter
..
61. Inform8.tion and retiii:ns.
62. Time 3nd place for paying tax.
63. Assessment.
64. Collection.
65. Abatements, credits; and refunds.
66. Limitati~ns. . . '
67. Interest.
68. Additions ~ the tax, additional amounts, and assessable
.' penalties.
69. Geriecil provisions relating to stamps.
70. Jeopardy, receiverships, etc.
71. Transferees and fiduciaries.
72. Licensing and registration.'
73. Bonds.
74. Closing agreements and compromises.
75. Crimes, other offenses, and forfeitures.
76. Judicial proceedings.
77. Miscellaneous provisions.
78. Discovery of liability and enforcement of title.
79. Definitions.
80. General Rules.
&c:
In 1980, p .L.. 96-ss9.

70. .
.. .
6(g)(3)$). amended item for chapter

.
Prior to IIIIICIIdmcnt, item 70 read as follows:
"70. J~y. ~. and rcceiversbips."

.
"' -'-'--'------~--
CHAPTER 61.-INFORMATION AND RETURNS

Subc~ali'ter., . . . , , . .
A. Re~ and rec,ords.
B. Misoellaneousprovisions.
So~p.t,er;~~+.~tU'fns and . Records'

Part
I. RecOrds, statements, and special returns.
n. 'Fax returns or statements.
m. Jnfomiation returns.
IV. Signing artd verifying of returns and other documents.
V. Time for filing returns and other documents.
VI. 'Extension of time for filing returns.
vn. Place..for filing .rel;urns or other documents.
'""
...1
"'1
PART I.-RECORDS, STATEMENTS, AND SPECIAL

RETI}RNS
Sec. :. .
n~
6001. Notice or regulations requiring record.s, statements,
'
and special returns.
Sec. ~0()1~ Notice .or. regulations requiring records,
statements, and special returns.
Every person liable for any tax imposed by this title, or
for the collection thereof, sj:lall keep such records, render
such statements, make such. returns, and comply with such
rules and regulations as the Secretary may from time to time
prescnbe. Whenever in the judg~ent of the Secretary it is
necessa.cy, he may,_require any person, by notice served upon
such person or by ,regulations, to make such .returns, render
such statements;: or keep such records, as the Secretary
deems sufficient .to show whether or not such person is liable for tiix under this title. The only records whjch an employer.shall be required to keep under this section in connec-
Code Sec. 60ll(d)

tion with charged tips shall be charge receipts, records
necessary to comply with section 6053(c), and. :copies of
statements .furnished by employees under section 6053(a).
In 1984, P.L. 98-369, Sec. 219, provides:
"SEc. 219. Ci.ARJFICATION OF Al.111101UTY ro REQuiRE CERTA1N INFORMATION.
"Nothing in any provision of law shall be construed to prevent

the Secretary of the Treaswy or his delegate from requiring (from
time to time) life insurance companies to provide such dala with respect to taxable years beginning before January I, 1984, as may be
necessary to cany out the provisions of Section 809 of such Code
(as added by this title)."
In 1982, P.L. 97-248, Sec. 314(d), added w. records necessary to
CO!llply with section 6053(c)," after wcharge receipts" in Code Sec.
6001. effective for calendar yn. begin. after 12131182.
In 1978, P .L. 95-600, Sec. SOI(a), added a new sentence to the end
of Code Sec. 6001, effective for payments lllllde after 12/31n8.
In 1976, P.L. 94-455, Sec. 1906(b)(I3)(A). substituted "Secretal)'"
for "Secretaly or his delegate" each place it appeared in Code Sec.
600 I. effective 2/ln?.
PART II.- TAX RETURNS OR STATEMENTS

Subpart
A. General requirement.
B. Income tax returns.
C. Returns relating to transfers during life or at death.
D. Miscellaneous provisions.
SUBPART A.-GENERAL REQUIREMENT
Sec.
6011. General requirement of return, statement, or list.
Sec. 6011. General requii-em~t of return, statement, or
lis(
.
'
'
.
(a) General rule.
When required by regulations prescribed by the Secretary
any person made-liable for any tax imposed by this. title, or
with respect to the ;coHection thereof, shall make a return or
statement according to the'forms and regulations prescribed
by the SecietaiJ: Every perSon 'reqUired to rilake. a return or
statement shall include. therein the information required by
such forms or regulations.
(b) Identification of taxpayer.
The Secretary is authorized to require such information
with respect to persons subject to the taxes imposed by
chapter 21 or chapter 24 as is necessary or helpful in securing proper identification of such persons.
(c) Returns, etc., of DISCs and former DISCs and FSC's
and former FSC's.
(1) Records and information. A DISC or former DISC
or a FSC or former FSC shall for the taxable year(A) furnish such information to persons who were
shareholderS at any time during such taxable year, and
to the Secretary, and
(B) keep such records, as may be required qy regulations prescribed by the Secretary.
(2) Returns. A DISC shall file for the taxable year such
returns as may be prescribed by the Secretary by-forms or
regulations.
(d) Authority to require information concerning section
912 allowances.
The Secretary. may by regulations require any individual
gross inwho receives allowances )Vhich are excluded
come under section 912 for any taxable year to include on
his return of the taxes imposed by subtitle A for such taxable year such information with respect to the amount and
type of such allowances as the Secretary determines to be
appropriate.
from
176
9,001
51
Information
Code -Sec. .6011(e)

(e) Regulations requiring returns on magnetic media, etc.
(1) In general. The Secretary shall prescribe -regulations
providing standards for determining which returns must be
filed on magnetic media or in other machine-readable
form. The Secretary may not require returns of any tax
impdsed by subtitle A on individuals; estates, and .trUsts to
be other than on. paper forms supplied by the Sec;:retary.
(2) ReqUirements of regulations. In prescribing regulations. under paragraph (1), the Secretary'.
(Afshail not require'any person to file returns on magnetic media unless such person is required to file at
least 250 returns during the calendar year, and
(B) shall take into accolint (amqng other relevant factors) .the ability of ~~- taxpayer to comply at reasonable
cost with the requirements of such regulations. .
Notwithstanding the preceding sente~ce, the Secretary
shall require partnerships having more thcpt 100 partners
to file returns on magnetic media.
(f) Promotion of electronic filing.
(1) In generaL The Secretaryis:authorized to promote the
benefits of and encourage the use of electronic tax administration programs, as they become available, through the
use of mass communications and other means.
(2) Incentives. The Secretary may implement procedures

to provide for the payment of appropriate incentives' for
'
electronically filed returns.
(g) Income, estate, and gift taxes.
For requirement that returns of income; estate; and 'gift
taxes be made whether or not there is tax liability, see sub-:
parts B an~ C.
. . .
.In '19!Ji; PL. i<Bd66; ~- 20di(c), redcsiiharea

and added new subsec. {f), effective 7122198.
subScc: {f) ~;00,.
-P.L 10:5-206, Sec:. 6012(c), substituted "beginning'~ for .~coding

on or" in Sec:. 1226 of P.L 105-34, see below. ,
ln 1991, PL 105-34, Sec:. 1224, added the sentence to the i:nd of
paia_ (c){2). ctreetivc [as amended by Sec:. 6012(il) of 105-206, see
above] Cot- panncribip tax. yrs. begin. aftct: 12131197.
ln 1!189, P.L 101-239, Sec:. 7713{a), amended subsec. (c), effective

foe returns die due date for which (determined without regard. to
extensions) is after 12/31189.'
'
Prior to amendment, subsec. {e) read as foUoi.os: -'

"{e) Regulations requiring returns on magnetic tape. etc.
"(I) In general. Tbe Secretary shall pn:scribe regulations provicling standards for determining which returns must be filed' on ~g
netic media or rn other Dllichine-readablc form. The Si:cretaiy may
not require returns of any tax imposed by subtitle. A on individuals.
estates, and b:Usts to be other than on paper fonns supplied by the
SecreWy. In prescribing such regulations, the Secre~ary shall take
into account (among other relevant factors) the ability of the taxpayer to comply at reasonable cost with such a filing requirement.
"(2) Certain returns must be filed on magnetic media.
"(A) In general. In lhe case of any person who is required to file
returns under sections 6042(a), 6044{a), and 6049{a) with respect to
more than SO payees for any calendar year, all returns under such
sections shall be on magnetic media.
"(B) Hardship exception. Subparagraph (A) shall not a~ly to
any person for any period if such person establishes to the sabsfaction of the SecreWy that its application to such person for such period would result in undue hardship."
.
. .
In 1988, P.i... 100-647, Sec:. 1015{(0{1), substituted "with respec! to
the collection thereof"' for "for the collection thereof" in subSec.
(a), effective on I 1110188.
'
In 1986, P.L 99-514, Sec:. 1899A(52), substiruted "subparts B and
C" for "sections 6012 to 6019, inclusive" in subsec. {f). effective
l!M'22186.
.
. In 1984, PL 98-369; Sec:. sOI(d)(l:i)(A), added "or a FSC or fat-
mer FSC" after "former DISC" in para. (c)(l). ;., Sec.

80l{d)(l2)(B), added ~and FSC's and fonpcr I'SC's" after "For-
mer DISC's" in the heading' of sUbsec. (c), effectiyc for uansac-

lionS aftet 12131184, in tax. yrs. end: after 1213li84'._"
ln 1!1&3, PL 98-67; Sec. l09(a), amtnded-subseci. (c), cffcetiw for
payments m.tc afll:r 12131/83; Sec. 109(b) ofthia Act prQvidcl:,
."~l *~ ol :waP, ~cO JIII8D!'*icf"PC-~:. :r: '- , , :: ",
"(I\.$.~.- Tbe Scci:ebuy of the y,.,......,, in consultation with
<,
the~ or Hclllb'init aomiiai ~--,haJJ
cOnduCt aSl\ldi
of the feasibility of requiring persons to file, on magnetic media;
9,002
177
and returns
re!Ums under seclio11 6011 of tbe lnleplal, Reveoue. Code of 1954

containing infonnalion described in section 605l{a) of such Code
(relating to W-2s).
.
"(2) Repon to Congrcss.-Notlalef dwJ July I, 1984, the Sec:relar)' of the Treasury shall submit to'' the Committee on Ways and
Means of the House of Rqnesentatives and lbe Committee on Finance of the Senate the results of die study conducted under para- .
graph (1)."
..
Prior to amendment, subsec:. {e) read as follows:
'.
"{e) Regulations ~ ~ on~ tape:. ere... . .. . .
"The Sec:retary shall pre$albc regUia11ons provJC!in~ s~ f?J' ,
delermining which re111ms must be filed oo magnetiC media or an
other machine-readable f01111- The. Secretary may 1101 requjre re111ms .
of any tax imposed by subtitle A on. iudividuals. ~ and trusts ,
to be Olbet dwJ c)ft:'papei' formS :Supplitd by lbe Sec:raazy. In ~
scribing such regulations. the Secretary shall take into account
(among otber relevant factors) the ~ty o~ the taxpayer to comply.
at a reasonable cost with soch a filing requiremenl"'
In 1982, P.L 97-248, Sec:. 319. ~ JUbsec:. {e) l\& subscc.. ..
{f) and added new subsec. (c), ~ecti~e 9~ , .. .
.
In 1978, P.L 95-615, Sec. 207(c), 'redc:Si~ subScc. {d) as sUbsec. (e) and added new subsec. (d); effective for tax. yrs. begin. atcr 1213In7.
In 1976, P.L 94-455, Sec. 1904(b)(10)(A)(Ii), del~ subsec. (d)
and redesignated sub$ei:s. {cj aixl' {f) u subsec:s; {c) and (d), respectively ... Sec:. 1906(b){1_3)(A), substituted "Secretary" for "Sccro-
Wy or his delegate" each place it appeared in Code Sec:. 6011, effective 211m.
Prior to delctioo subsec. {d) read as folloWs:

"{d) Interest equalization tax J'e\UCIIS,. etc .
"(I) In general.
.
. .'
"{A) Every person shall make a return for each calendar quarter
during which be incurs liability for the tax imposed by: section .
4911, or would so incur liability but for lbe proYisioDS of section
4918. Tbe return sb8ll. in addition to' such otber)nformatioo as lbe
Scc:retary 0.. bis''delcgale'inay by~~ include a' li~
of all acquisitions made by such person during lbe caiCDdlr quancr
for which exemption is clliimed utldcr section '4918 accompanied
by a copy of any rerum~ made duriDg sucll' quarter 'undcnobpar.graph (B). No- return or accolll)IIIDying evidence shall be nquired
under Ibis paragraph. in connectioo with any acquisition with re.
- .-
.
. c .
spect to which- ,
"{i) an lET cJc.Ui eonfuni&tion' i; obtained in aCcorilancc ..;;th die
provisions of section 4918(b),
. _..
"(ii) a validation cerlifJCatc ~~in SCfliiX! .4~18(b) .issued to ..
the person from whom such acquis1bon was made s obtlined, and
such ccnifJCatc was filed in accordance with the requiremeots pre-
scribed by the Secretary or his delegate, or
"(iii) a validation certificate was obtained by the acquiring person after such acquisition .00 be~ the date prescl::i~ by section
6076{a) for the filing of the rerum.
nor shall any such acquisition be required to be listed in any return
made under Ibis paragrapb.
"(B) Every person who incurs. liability for rax imposed by seclion 491 I shall. if be disposes of the stoclc:
debt obligation with
respect to which such liability was incurred prior to the filing of
the return required by subpuagrapll (A) {unless such disposition ~s
made under circumstances which entitle such person to a c:redit
under the provisions of section 4919), make a return of such tax.
"(2) Information returns of commercial banks .. Every United
States person (as defined in seetion 492b{a)(4)) which is a commercial bank shall file a return with respect to loans and commitments
to foreign obligors at such times, in such manner, and setting fonh
such infonnation as the SecreWy or his delegate shall by forms
and regulations prescribe.
"(3) Reporting requirements for certain members of exchanges
and associations. Every member or member organization of a national securities exchange or of a national securities association registered with the Securities and Exchange Conllllission. wbicb is not
subjecr to the provisions of section -4918(c), sball keep such records
and file such infor:matioo as .the Sec:reWy or his delegate may. by
forms or reglilations prescribe in connection widt licquisitions and
sales effected by such member or member organization; as a broker
or for his own IICCOUDl. of stock of. a f~gn issuer or debt obligations of a foreign obligor-
..
"{A) with respect to which a validation CCJtificate described in
section 4918(b){l){A) has been reCeiVed by sucb member or member organization; or
.
.
"(B) with respect to w~ ~~;~_ ~uiring Uniled ,Swe.. person is
subject 10 tbc fax imPosed by sCctlon 4911."
..
In 1971, P.L 92~178; Sec::'s04(a),'redcslpafed ~;(c) as sui>-
sec. (f) and added;- subsccJ'(o), cflecdw.fOI' rax;:yrs.- elid. a~~rt
.12/.Jlni,.exccpt tba( a COJporation may~ be DISC for any tax.
or
~=-~~~~~ 4{~'(~ u(dc;'q;~~~,
shioa u midc 1indcr circurllstancei wbldr entitle' llii:6' ~ ..... to a'

credit Wider the .provisiODS of seclioa 4919)'1 after "subparqapb -: r
lnfonnation and returns
COde Sec. 6012(a)(l)(A)(iv)
(A)~ in subpara. (d)(1)(B)., .. Sec, 4(g), &lllellded para. (d)(3), effective ll/26169.
.. :
.
.
Prior to ameadment. para. (d)(3) read as follows:
"(3) ReponiJI& requiremenls for members of excbmges arid associations. Every member or member orpnizlltiOII of a national sec:urities exchange or of a national .securities associatio.o registered
with the Securities and Exchange Commission shall keep such
records and file such infonnation as the Secrewy or his delegate
may by regulations prescribe in C0J111CCtion with acquisitions and
sales effceled by such member or member otganiza!ion as !l broker,
and acquisitions made for the IICCOUDt of such member or member
orpni.zalion, of IIOCk or debt obligations
"(A) as 10 wbich a c:atificate of America~~ ownership or blanlcet
certificate of American ownership is executed and flied with such
member organizatioa as prescribed under section 4918(e); and
"(B) as 10 wbich a written confirmation is furnished 10. a United
States person sWiDg lba lbe acquisition"(i) in the case of a transai:Uon on a national securities exchange,
was made subject 10 a special coolnlct, or
"(ii) in the case of a transaCtion not on a national securities exchange, was from a person wbo had not filed a certificate of American ownership with respect 10 such stock or debt obligation or a
blanket certificate of American ow.aersbip with respect 10 the account from which such stock or debt obligation was sold."
ID 1967, P.L. 90-59, Sec. 4(b), amended para. (d)(l), effective for
acquisitions of stock and debt obligations made after 7/14167.
Prior to amendment, para (d)(!) read as follows:
"'(1) In general. Every person shall make a return for each calendar quarter during which he incurs liability for tbe tax imposed by
section 4911, or would so incur liability but for lbe provisions of
section 4918. The reaun sball, in addition to sucb other information
as lbe Sccrewy or liis delegate may by regulations require, include
a list of all acquiSitions made by such pcrs(>n during tbe calend3r
quarter which are exempt under tbe provisions of section 4918, and
shall, with respect to each such ~.be accompanied either
(A) by a certificare of America~~ o~p which complies with
die provisions of sCction 4918(e), or (B) in tbe' case of an acquisition for which otbi:r proof of exemption is permitted under section
4918((), by SlllenleDt seuing forth ll summary of the .evi~ ~
tabli&hiDg sucll exemplion and the reasons for the person's inability
10 establish prior American ,ownership under subsection (b), (c), or
(d)
section 4918. No retamor aa:ompanyilig evidence sballbe
requU:ed under this paragraph in c:onDeCiioo . IIVith any acquisition
with .respect 10 wb!cb a written c:onfumatioli, ~ in licc:ordance with the rtqWrernents describe(! iri section 4918(c) or (d), is
lle8l.ed as coliclusive proof' of priOr Anltric:an owoersllip; nor sbaU
any sucb ,acguisilion be required to be -I~ in any i-ctum ~,,
under.this~~
- .... .
,. : .. '.
. ..
In J.ll65. P.L. 89-44, Sec.. iOl(b)(6),' deleted subsec. (c); eftecuve
"(e) Fust reaun period.-Notwi~_any ~vision of section 601l(d)(l) of the Internal Revenue Code of 1954, ibe firsc period for which re111111s shall be made UDder sucb section 601l(d)(i)
shall be lbe period CCliDIIIC'.DCin "Joly :19; 1963. and' eDding at lbe
close of lbe calendar quarter in which. ~ CDICIJDI:Dl ~,this At:l.
[912/64] occurs.
, . . . . . . ., . .
In 1958, P.L. 35.g59, Sec. 161, redesignated subs= (c) as" 5ubsec.
(d); and added new subsec:(c), effective~nthe firsc day of the fu-st
calendar quarter which begins more than 60 days after 912/58.
SUBPART B.-:-INcoME TAX RETuRNs

i
Sec.
6012. Persons required to make returns of income.
6013. Joint returns of income tax by husband and wife.
6014. Income tax retum.:._tax not computed by taxpayer.
6015. Relief from joint and several liability on joint return.
6015. Repealed [Declaration of estimated income tax by individuals.]
6016. Repealed [Declarations of ~stimated income tax by
corporations.]
6017. Self-employment tax returns.
6017A. Repealed [Place of residence.)
In 1998, P .L. 105-206, Sec. 3201(f),.idded item 6015.
In 1989, P.L. 101-239, Sec. 77ll(b)(3), deleted item 6017A.
Prior to deletion item 6017A read as follows:
"6017A. Place of reSidence."
ID 1984, P.L. 98-369, Sec. 412(c)(l), deleted ile!D 6015.
Prior to deleOon, item 6015 read as foilows:
. ~15. Dedaration of estimated inoome tax.by individuals."

In 1972, P.L. 92-512, added item 6017A.
In 1968, p .1.. 90-364, Sec. .103, deleted item 6016..
Prior to deletion, i!=.tij>16 ~-..S follows:
..
~16. Oeclatation5
income tax by corpc)rations.
or
6f1:1.165. ...
of estimated
Sec. 6012. Persons required to miLkeretums of income.

(a) General rule.
'Returns with respeCt to incom:e taxes under subtitle A
shall be made by the following:
-: (l)(A)'Every individual having fof'!the taxable.year gross
;.;-~.>.income-which eiquals'orJexceeds the. exemption amount,
. excep~ that_a return _sba:ll nor-;be:require<h>f"an ~di_v_id-
""'
' . ' .. ..
.
'
PriOr'to deldion, Siaec. (c) tad as folloWs:
. . ,
c.l
"'(c) Relurn of retaiJcn udse taxes by suppliers. ::.- ~-. :;~, !,; ::. :.>: ;: ;
:UJI!Ier
. ~(~) ~ tulc.
~ ~~ by:IM -~' ..
or his .delegate, !be SCC:retalj or his delegate -may entet into an
agreeiDCnt With. a)' Supplier' with respect to atfy ~ers excise tax
imposed by cllaptl:r 31 (not including tbe taxes imposed by stction
4041), whereby such supplier will be .liable to remrn and pay such
tax (for the periocl for which such agreemeDt is in effect) for the
pCrson who (without regard 10 this subsection) is required to rerum
and pay sucll tax. Except as provided in lbe regulations prescribed
under this subsection. .. '), ,. . . . . . .
.
"(A) all ~vi.~ns of law (including penalties) applicable in respect of the pets(in who (Without regaro to ibis subseCtion) is requiRod to relllm and pay the tax shall apply 10 tbe supplier entering
into the a~t, and
"(B) the
w,;o (without regard 10 this subsection) is requU:ed. to retam and pay such laX remain subject 10 all proVisions
of law (iDchlcliDg peultics):applialble in respect:of such person.
"'(2) Limitations on .-ag=ment authority in lbe case of bouse-tohouse salesmen. In 1M caae of sales. by bouse-to-bouse. salesmen.
of articles subject 10 tax under chapter 31 (other than section 4041)
which are supplied by a manufac:lllm" or distribuiOr, if the manufacIWer or distributor establishes die. ~I lilt .price. at whid!,~ ar,
ticles ~ 10 be sold, the Sccrewy or his delegate shall ~ as a
condition 10 entering into an agreemem under paragraph (1), re-
quire.;.... ' :;
~'(A) d!at such. _bou9e-lo,bouse salesmen. f:XCCUI!' powers .of aaorney making sucb.~!Jfaclulu or disuibutor.an.agent for the reaun.
and payment or such liX;

'"(B) that the manufacturer or distribulor lllllke separaiec tetums
with respect.!'! each -such bouse-to-bouse salcsman, or
- ., .
"(C) that the manufaciurer 'or disttibul'!r assunie any lial!ility for
tax on articles supplied by any person other than such manUfacturer
;;
.,.
'
or distributor.~
ID 1!16f, P.L. 88-563.- Sec. (3)(a), redesignated subsec. (d) as aubsec. (e), and added .new IUbsec. (d). Sec. 3(e) of this At:l. provides
as follows:
. . ..... . ~ ... ;t: .. ~'/ !, : ... ~n~ :.: ~~:t,;-:_, . ;-_...

'
(i) who is not married (determined by applying sec-
~! uaJ~;:
:tion 7703), is not a 'surviving spoilse(as defmed in

. section 2(a}}, is nota head of a household (as defined
in section.2(b}), and for the taxable year has gross income of.lessthan the sum of the exemption amount
plus the -basic standard deduction applicable to such
an individual,

'
(ii) who is a head of a household'(as so defined) and
for the taxable year has gross income of less than the
sum of the exemption amount plus the basic standard
deduction applicable to such an individual,
(iii) who is a surviving spoUse(as sodefined) and for
the taxable year has; gross income of less than the
sum of the exemption amount plus the basic standard
deduction applicable to such an individual, or.
:(iv) who is entitled to make a joint return and whose
gross inciome, when combined with the gross income
of his spouse, is, for the taxable year, less than the
sum of twice the exemption amount . plus the basic
standard dedi.lction .applicable to a joint return, but
only if such individual arid his spouse, at the close of
the taxable year, had the same household as their
,.
home.
Clause (iv) shall not .apply if for the taxable year such
spouse makes a separate return or any other taxpayer is
penan
178
9,003
5/o
Information and returns
Code Sec. 6012(a)(l)(A)(iv)

entitled to an exemption for such spouse under section
151.(c).
(B) The amount specified in clause (i), (ii), or (iii) of
subparagraph (A) shall be increased by the amount of I
additional standard deduction (within the meaning of
secti()n 63(c)(3)) in the case of an individual entitled to
such deduction by reason of section 63(f)(l)(A) (relating to individuals age 65 or more), and the amount
specified in clause (iv) of subparagraph (A) shall be increased by the amount of the additional standard deduction for each additional standard deduction to which the
individual or; his spouse is entitled by reason of section
.
63(f)(1) .. ;
(C) The exception under subparagraph (A) shall not apply to any individual(i)' who is described in section 63(c)(5) and who
has-(I) income (other than earned income) in excess of
the sum of the amount in effect- under section
63(c)(5)(A) plus the additional standard deduction
(if any) to which the individual is entitled, or
(II) total gross income in excess of the standard
deduction, or
(ii) for whom the standard deduction is zero under
section 63(c)(6).
(D) For purposes of this subsection-'

. .
(i) The_.t~. ~s~dard de4uction", "baSi'<-Standard
deduction" and ."additional standard deduction" have
the respective meanings given such terms by section
"' ' '
63(c).
(ii) The term "exemption amounf' has the meaning
giveJl such _term by sectibn 15l(d). In the case of an
individu8I described in section 151(d)(2), the exemp. .tion. amount. shall be zero-.
(2) Every corporation subject to taxation under subtitle A;
(3) Every ,estate the gross income of which for the taxable
year is $600 or more;
(4) Every trust having for the taxable year any taxable income, or having. gross income of $600 or over, regardless
of the .amoimt of taxable -income; _ (5) Every estate or trust of which any beneficiary is a
nonresident alien;
(6) Every political organization (within the meaning of
section 527(e)(1)), and every fund treated under section
527(g) as if it constituted a political organization, which
has political organization taxable income (within the
meaning of section 527(c)(1)) for the taxable year or
which has gross receipts of $25,000 or more for the taxable year (other than an organization to which section 527
applies solely by reason of subsection (f)(l) of such section);-and
(7) Every homeowners association (within the meaning of
section 528(c)(l)) which has homeowners association taxable income (within the meaning of section 528(d)) for the
taxable year[;]
(8) Every individual who receives payments during the
calendar year in which the taxable year begins under section. ,3507. (relating to advance payment of earned income
credit)[; and}
(9) Every estate of an individual under chapter 7 or 11 of
title 11 of the United States Code (relating to bankruptcy)
the gross income of which for the taxable year is not less
than the sum of the exemption amount plus the basic standard deduction under section 63(c)(2)(D).
except. 'that subject to such conditions, limitations, and exceptions and under such regulations.as may be prescribed by
9,004
179
the Secretary, nonresident alien individuals subject to the tax

imposed by section 871 and foreign corporations subject to
the tax imposed by section 881 may ~ exempted from the
requirement of making returns under this section.
(b) Returns made by fiduciaries and receivers.
(1) Returns of decedents. If
individual is deceased,
the return of such individual required under subsection (a)
shall be made. by his executor, administrator, or other person charged with the property of such decedenL
(2) Persons under a disability. If an individual is unable
to make a return required under subsection (a), the return
of such individual shall be made by .~ duly authorized
agent, his committee, guardian, fiduciary or other person
charged with the care of the person or property of such individual. The preceding sentence shall not apply in the
case of a receiver appointed by authority of law in possession of only a part of the property of an individual.
(3) Receivers, trustees and assignees fot corporations.
In a case where a receiver, trustee in a case under title 11
of the United States Code, or -aSsignee, by order of a court
of competent jurisdiction, by operation of law or otherwise, has possession of or holds title to all or substantially
all the .property or business of a corporation, whether or
not such property or business is being operated, such receiver, trustee, or assignee shall mak~ the return of income for such corporation in .the saine manner_ and_ form
as corporations are required to make such .returns.
(4) Retliri:Js of_estates,and ~-Returns. o(an ~state, a
trust. or an .estate of an individual under chapter 7 or 11
of title -ll of the United States Code shall be made by the
fiduCiary thereof.
(5) Joint fiduciaries. Under such regulations as the Secretary may prescribe, a return made by one of two or-more
joint fiduciaries shall be suffici~nt..compliance with the requirements of this section. A return made pursuant io this
paragraph- shall contain a statement that the fiduciary has
sufficient knowledge of the affairs of the person for whom
the return is made to enable him to make the return, and
that the return is, to the best of his knowledge and belief,
true and correct.
( 6) IRA share or partnership income. In the case of a
trust which is exempt from taxation _under section 408(e),
for purposes of this section, the trust's. distributive share
of items of gross income and gain of. any partnership to
which subchapter C or D of chapter 63 applies shall be
treated as equal to the trust's distributive share of the taxable income of such partnership.
(c) Certain income earned abroad or from sale of residence.
For purposes of this section, gross income shall be computed without regard to the exclusion provided for in section
121 (relating to gain from sale of principal residence) and
without regard to the exclusion provided for in section 911
(relating _to citizens or residents of the United States living
abroad).
(d) Tax-exempt interest required to be shown on return.
Every person required to file a return under this section
for the taxable year shall include on such return the amount
of interest received or accrued during the taxable year which
is exempt from the tax imposed by chapter 1.
(e) Consolidated returns.
For provisions relating to consolidated returns by affiliated
corporations, see chapter 6. .
an
Ill 2000, P.L -10&-230, Sec. 3(a)( I ).added -~or which bas grou ~
ceipcs of $25,000 or more for the taxable y- (odler diaD 1111 OfPDization to which section S27 applies solely by reason of subsedioD
SiC
Information and- returns
Code Sec. 6012
(f)(l) of auch scaion)" aher Mtaxable year" in subsec. (a)(6), effecyn. begin. after 613012000.
Ill 1998, P.L 105-206, Sec; 2004, of this Act. reads as follows:
tive. for tax.
"SEC 2004. RlmJRN-FREE TAX SYSmd.

"(a) 1n general. The Scctewy of lhe Treaswy or the Secretary's
delegate shall develop procedures for lhe implemenlation of a retuni-fri:e tax system under which appropriate individuals would be
permitted 10 comply With lhe Internal Revenue Code of 1986 without making lhe rc:tum required under section 6012 of such Code for
!Uable )'Cal1 begimtlng after 1007.
"(b) Repon. Not later than June 30 of each calendar year after
1999, die Scctewy shall report 10 the Committee on Ways and
Means of die House of Represenlativcs and the Committee on Finance of the Senate on
"(I) what additional resources the Internal Revenue Service
would need to implement such a system;
."(2) die changes to lhe Internal Revenue Code of 1986 that could
enhance lhe use' of such a system;
"(3) lhe procedures developed pursuant to subsection (a); and
"(4) the number and classes of taxpayers that would be permitted
to use lhe procedures developed pursuant to subsection (a)."
-P.L. 105-206, Sec. 600S(e)(3), added "on or" before "before"
each place it appeared in Sec. 312(d)(2) [sic (e)(2)) of P.L 105-34,
see below.
-P.L. 105-206, Sec. 6012(e), substituted "beginning" for "ending
on or" in Sec. 1226 of P.L. 105-34, see below.
Ill 1997, P.L 105-34, Sec. 312(d)(ll), substituted "(relating to gain
from sale of principal residence)" for "(relating to one-time exclusion of gain from sale of principal residence by individual who has
attained age 55)" in subsec. (c), effective for sales and exchanges
after 5/6/97, except as provided by Sec. 312(d)(2)-(4) [ (e)(2)-(4)]
of this Act [as amended by Sec. 6005(e)(3) of 105-206, see above],
which reads as follows:

"(2) Sales on or before date of enactment. At !he election of die
taxpayer, lhe amendments mide by this section shall not apply to
any sale or exchange on or before the date of the enactment of this
Act
"(3) Certain sales Within 2 years aher date of enactment. Section

121 of die Internal Revenue Code of 1986 (as amended by this section) shall be applied Without regard to subsection (c)(2)(B) there<>f
in the case of any sale or exchange of property during the 2-year
period beginning' on the date of the enactment of this Act if lhe
taxpayer held such property on the date of the enactment of this
Act and fails to meet lhe ownership and use requirements of subsection (a) ~hrith respect to such property.
'"(4) Binding c:OnlniCU. At the election ofthe taxpayer, the
amendments made by this section sball not apply to a sale or excbange after tbc dale of die enactmeot of this Act, if "(A) ..such U1e or exchange is pursuant to a contnlct which was
binding -oa such dale, or

:"(B) wi1boUt tigard til ~h imlendments, gaiD would 001 be recognized llllda sel:tiOii 1034 of the 1ntemal Revenue Code Or 1986
(as in effect on the day before die. date.
the enactment of this
Act) on such sale or exchange by reason of a new residence acquired on or before such date or with respect to the acquisition of
which by lhe taxpayer a binding conlraet was in effect on such
date..
This paragraph shall not apply to any sale or exchange by an individual if die treatment provided by section 877(a)(l) of the Internal
Revenue Code of 1986 applies to such individual."
-P.L. 105-34, Sec. 1225, added para. (b)(6), effective [as
amended by Sec. 6012(d), 105-206, see above] for partnership tax.
yrs. begin. aher 12131197.
In 1!188, P.L. 100'647, Sec. IOOI(b)(2), amended subclause
(a)(I)(C)(i)(l), effective for tax. yrs. begin. after 12131186.
Prior to amendment, clause (a)(I)(C)(i)(l) read as follows:
"(I) income (other-than earned mcorne) in excess of the amount
in effect under section 63(c)(5)(A) (relating to limilation on slandard deduction in the case of ceruin dependents), or"
ID 1!186, P.L. 99-514, Sec. 104(a)(I)(A), amended para. (a)(l) ...
Sec. 104(a)(I)(B), substiblted "not less than the sum of the exemption amount plus the basic standard deduction under section
63(c)(2)(D)".: for "$2,700 or more" in para. (a)(9), effective for tax.
yrs. begin. afta' 12131/86.
.
Prior to amendment, para (a)( I) read as follows:
"(I )(A) Every individual having for the taxable year a gross income of die exemption amount or more, except that a return $hall
not be required of an individual (other than an individual descn'bed
in subparagraph (c))
"(i) who is not married (determined by applying section 143), is
not a surviving spouse (as defined in section 2(a)), and for die taxable year has .a gross income of less than the sum of the exemption
amoual plus die zero bracket amount applicable to such an individual,
"(ii) who is a surviving spouse (as so defined) and for die taxable year has a gross income of less than the sum of the exemption
of
180
amount plus lhe zero braclcet amount applicable to such an individ~or
..
\iii) who is entitled to make a joint return under section 6013

and whose gross income, when combined with die gross income of
his spouse, is, for the taxable year, less than the sum of twice the
exemption amount plus the zero bracket amount applicable to a
joint return, but only if such individual and his spouse, a1 the close
of the taxable year, had the same household as their home.
Clause (iii) shall not apply if for. the taxable year such spouse
makes a separate return or any other taxpayer is entitled to an exemption for such spouse under section 151 (e).
"(B) The IIIIIOUnl specified in clause (i) or (ii) of subparagraph
(A) shall be increased by the exemption amount in the case of an
i~dividual entitled to an additional personal exemption under secbon ISI(c)(l), and lhe amount specified in clause (iii) of subparagraph (A) shall be increased by the exemption amount for each additional personal exemption to which the individual or his spouse is
entitled under section ISI(c);
"(C) The exception under subparagraph (A) shall not apply to"(i) a nonresident alien individual;
"(ii) a citizen of the United Slates entitled to the benefits of section 931;
"(iii) an individual making a return under section 443(a)(l) for a
period of less than 12 months on account of a change in his annual
accounting period;
"(iv) an individual who has income (other than earned income)
of the exemption amount or more and who is described in section
63(e)(I)(D)); or
"(v) an eslate or truSL
"(D) For purposes of this paragtaph"(i) The term 'zero bracket amount' has the meaning given to
such term by section 63(d).
"(ii) The term .'exemption amount' has the meaning given to
such term by section 151(f)."
- P.L 99-514, Sec. 1525(a), redesignated subsec. (d) as (e) and
added new subsec. (d), effective for tax. yrs. begin. after 12131186.
In 1984, P.L. 98-369, Sec. 412(b)(3), deleted ~or section 6015(a)"
after "subsection (a)" in para. (b}(2), effective for tax. yrs. begin.
after 12131184.
In 1983, P.L 97-424, Sec. 542(a), and (b) provide:
"SEC. 542 No Rlm!ltN REQUIRED OF INDMDUAL WHOSE ONlY
GROSS INCOME IS GRAN!' OF $1;000 PRoM STA'Il!.
"(a) In General. -Nothing in section 6012(a) of the Internal Revenue Code of 1954 shall be construed to i'equire the filing of a return .With respect to income taxes under subtitle A of such code by
an individual whose only gross income for -the taxable year is .a
grant of $1,000 received from a Slate which made such grants generally to residents of such Slate.
. .
. ;.
"(b) Effective Dale. -Subsection (a) shall apply to taxable years
beginniDg aher December 31, 1981."
. .
In 198%; P .L. 97"248, Sec. 353, of this .Act provides:
"SEC. 353. REPoRT ON FORMS:
"
. ~. ,:
"Not later than June 30, 1983, die Secretary: of' the Tre8sury or
his delegate shall study and report to the Con~ methods of
modifying the design of the forms used by the Internal Revenue
Service to achieve greater accuracy in the reporting of income and
the matching of information reports and returns With the returns of
taximposed by chapter I ofthe Internal Revenue Code of 1954"
In 1981, P.L. 97-34, Sec. 104(d)(I)(A), substiblted "the sum of the
exemption amount plus the zero bracket amount applicable to such
an individual" for "$3,300" in clause (a)( I)(A)(i) ... Sec.
104(d)(I)(B), substituted "lhe sum of lhe exemption amount plus
the zero bracket amount applicable to such an individual" for
"$4,400" in clause (a)(1)(A)(ii) ... Sec. 104(d)(I)(C), substituted
"the sum of twice the exemption amount plus the zero bracket
amount applicable to a joint return" for "$5,400" in clause
(a)(l )(A)(iii) ... Sec. I 04(d)(l )(D). substituted "lhe exemption
amount" for "$1,000" each place it appeared in para. (a)(l) ...
Sec. 104(d)(I)(E), added new subpara. (a)(I)(D), effective for tax.
yrs. begin. after 12131184.
-P.L 97-34, Sec. lll(b)(l), substituted "relating to citizens or
residents of the United Slates living abroad" for "relating to income earned by employees in cerlain camp$", effective for tax. yrs.
begin. after 12/13/81.
In 1980, P.L 96-589, Sec. 3(b)(l), added new para. (a)(9) ... Sec.
3(b)(2), substituted. "an eslate, a trust. or an estate of an individual
under chapter 7 or 11 of title II of the United Slates Code" for
"an eslate or a trust" in para. (b)(4), effective .for aay banlauptey
case begin. after 3/25181 [more than 90 days after the date of enactment (12/24180)]. Sec. 7(g) of this Act provides:
"(g) Definitions.
"ror~ofthissection-
"(1) Banbuptey case. The term 'bankruptcy case' means any

case under title II of the United States Code (as recodified by Public Law 95-598).
"(2) Similar judicial ~g. The tenn 'similar judicial proceeding' means a receivership, foreclosure, or similar ~gin
9,005
5\G
Information and retw
Code Sec. 6012

a Feder.ll or State cowt (as modified by section 368(a)(3)(D) of the
lnrcmal Revenue Code of 1954)."
-P.L. 96-589, Sec. 6(i)(5), substituted "trustee in a case under title 11 of the.United States .Code" for "trustee in banlaupu:y" in
para. (b)(3), etfective 11Y1n9. except for any proceeding UDder the
BllllkruJ*:y ~begun before 1011n9. See Secc 7(g) of this Act, n:-
proohlced above..
'
-P.L. 96-222;,Sec.108(a)(I)(A). redesignated Sec. 202(f) of P.L.

95-600 as Sec.i'202(g) [see below).
In 1973, P.L. 95-615; Sec;202(f)(5), substituted "income earned
by employees in cenain camps" for ~earned income from soutces
without the Unitecl' States" in subsec. (c), for tax. yrs. begin. after
'TI.'
..
-P.L.' 95-600, Sec. IOI(c), substituted w$3,050" 'for "$2,950",

substituted w$4,150" for ~$3,950" aDd substituted "$4,900" for
''$4,700" in para. (a)(l}, effec\ive for tax. yrs. begin. after
12131ns.
-P.L. 95-600, Sec. 102(b)(l), substituted "$1,000", "$3,300",

"$4,400~. aDd "$5,400" for "$750", "$3,050". "$4,150", and
w$4,900" respectively each place it appeaRd in para. (a)(l); as
amended' by sec. IOI(c) of this Act, effective for tax. yrs. begin.
after I213In8.
-P.L. 9S-600, Sec. IOS(d), added para. (a)(8), effective for tax.
yrs. begin'. after 1213 rns.
-P.L. 95-600, Sec. 404(c)(8), substituted "rel'ating to one-time
exclusion of gain from sale of principal resideilc:e by individual
who has attained age 55" forwrehiting to sale of residence by individual who has attained age 65" in subsec. (c), effective for sales
or exchanges after 7126178, in tax. yrs. ending after 7126178. Sec.
404(d)(2), of the Act, provides as follows:
"In tbe case. of a sale or ctcbange of a residence before July 26,
1981, a taxpayer who bas attained age 6S on the date of such sale
or excballge may elect to. have section 121 of the Internal Revenue
Code of 1954 applied by substituting '8-year period' for '5-year period' and.: 'S. years'fot. '3 -~-in subsections (a),. (d)(2), aDd
(d)(S) of irucli ,section;"
,. :

la:lm; P.L :95-30, Scc.-104, amended para. (a)( I), effective for
l:llrl: yrs. b!:gia.l after 1213lfl6. '
: :
.
Prior to amendment, para. (a)( I) read as follows:
"(I)(A) Every individual having for the taxable year a gross in,
come of:-$750 or more;-ext:ept thal a return shall, not be required of
an individual (other than an individual referred to in section
142(b)).-,
. .
.
.
.
.
"(i) who is, not married (determiJJcd by applying section 143). is
not a surviving spouse (as defined in section 2(a)). aDd for the taxable year bas a. gross:income of k:ss than $2,450,
"(ii).who.is-a surviving spouse(as so defined) and for the taxable year has a gross income of less than $2.850, or
"(iii) Who is entitled to make a joint return under section 6013
and whose gross income, when combined with the gross income. of
his spouse, is,. for the taxable year, less than $3,600 but only if
such individual and his spouse, at the close of the taxable year. had
the same household as ~ home.
"Clause -(iii) shall not apply if for the taxable year such spouse
makes a separate return or any other taxpayer is entitled to an exemption for such spouse under section 15l(e).
"(B) The amount specified- in clause (i) or (ii) of subparagraph
(A) shall be increased by $750 in the case of an individual entitled
to an additional personal, .exemption under section 15l(c)(l), and
the amount specified in clause (iii) of subparagraph (A) shall be increased by $750 for each additional personal exemption to which
the individual or his spouse is entitled under section 151(c);
"(C) Every individual having for the taxable year a gross income
of $750 or more and to whom section 141(e) (relating to limiwions
in case of certain dependent taxpayers) applies;"
In 1976, P.L. 94-455, Sec. 401(b)(3). amended so much of para.
(a)(l) as preceded subpara. (C). effective for tax. yrs. end. after
I213In5.
Prior to amendment so much of para. (a)( I) that preceded subpara.
(C) read as follows:
"(I )(A) Every individual having for the wable year a gross income of.$750 or more. except that a return shall not be required of
an individual (other than an individual referred to in section
142(b))w(i) who is not married (determined by applying section 143(a))
and for !be taxable year bas a gross income. of less than $2,050, or
"(ii) who is entitled to malce a joint return under section 6013
and whose gross income, when combined with the gross income of
his. spouse. Is,; for the taxable year, less than $2,800 but only if
such individual aDd his spouse, at lbe close of the taxable yeari bad
the same household as their home.
Clause (ii) shall not apply if for tbe taxable year such sponse
IIIUes a sepan1e recum 01' any olbec-tupayer.. is c:ntitled to an exemplioll fonuch.spousa.uuder scctiolt 1.51(e)..
w(B) The $2,050 amount specified in subparagraph (A)(i) sball be
inereucd '.to $2,800 in lbe case of ID individual entitled to an additioul penoaa! exemplion under~ 151(c)(l), - ' the $2.800
181
amount specified in subparagraph (A)(ii) shall be increased by $750

for each additional personal exemption to which the individual or
his spouse is entitled under section 151(c);~
. -~--- 1 .. ;
-P.L. 94-455, Sec. 1906(b)(I3)(A). substituted "Secretary'~ for
"Secretary or his delegate" in subsec. (a). and par11.. _(b)(5). effective2/In7.
.
. . . : ,'_,., . . . . .
-P.L. 94-455, Sec. 2101(c), deleted "and" at ~ end of para.
(a)(5), ad~ "and" !II tbe en~ of para. (a)(6}ia!)d added pira,
(a)(7), effective for-tax. )1S. begm. afte!: 1213117,3;,,. , .. , ...
In 1975, P.L. 94-164, Sec. 2(a)(2), substitu~ "$2.450". for
"S2.35o: in clause (a)(I)(A)(i), substi~ted "$~~for .."$2,450."in _clauso (a)(I)(A)(J.i), and substiiUted "$3,600~,,for.. ~$3.400" in
clause (a)(I)(A)(iii), effective. for taxable yean eliding aft~
1213In5 and before 111m.
. , _, ,. o:
, ..
-P.L. 94-164, Sec. 2(e), extended the. effe~;tive: dale, for amendments made by P.L. 94-12, Sec. 20l(b), to include tax. yrs. end. af,
ter I213In4 and before.I/In'l:.. _ .
-PL. 94-12, Sec. 201(b), amended subparas. (a)(l)(A,):and (B),
effective for. tax.. yrs.. end. after 12f;lll74,and be(~ .1/lflf>. -.
Prior to amendment. subparas.. (a)(l)(A) and (B), _read as folio~:
"(I)(A) Every individual havins for the ~year a gross-income of $750 or more. except that a return shall not be reqaircd of
an: individual (other than an ,individual refem:4. to in section
142(b))'
'
.
. .
"(i) who is not manied (determined by applying seetioa 143), is
not a surviving spouse (as defmed in section 2(a)), and for the taxable year bas a gross income_ of less than $2,350, . . .
. . .. .
."(ii) who is a sUrviving spouse (as so defmed) and for lbe taxabie year has a gross income of)ess than $2,650. o( . . ;, : ..
"(iii). who is entitled.to iDake a joint return under. seciioa @f3
and whose gross income, wben combined with the &JI?SS inc:ome of
his spouse, is. for !he tWI;Ie year. ~ ,than $3.~ buto OI!IY if
such individual aDd his spouse, at the close of_ thq ~~ Year.!lad
the
~ househoi~J.S. t,t,tc;.~~~,,. ihc.'
.. ,, -: , ' ""sub&- :''
qa~-(iU), s.b&l1 ~I;III!PQ<,.if fpr,,, . ~ablp:~IICd.. -~
~ a,separ;W; ~- %P..Y.~pthr.r.J~xpayer _.1~::~. . . ,to,;~":
emption for such spouse under section 15l(e).
,:,1.,
:. ~(!l.,>_,'ijle.~qpec~~-~ (i).9,t, <ll.l.::~~:"'~

(A) ..,...1 be~ by.'f'.50,m ,1/JJC case 01 Jl!l.~~'l'-, .
..
to an addilional ~l)al,ex~~ ~ .~D J!i~(c)(l),_;aDd

the ~t specifled.m c,lause (iii}:Q( sub~,<"') sba1J bc,_in;
creased ,by $750 for eacb,,,a4ditio~ per$0n&f -~~ ~ wbidi
the indiv1uai oc his spouse_;_, entitled under_ section l~~(c);~.. ,.....
-P.L. 93-625, ~ec. IO(b), deleted. ~and ... at,,lho ~ of ~
(a)(4), inserted "aDd~, at tile. end._of para., (a)(S).. addQII J!CW P!I(L
(a){6), and deleted tbe fmal.~ . in su~ (a,),;~l1c:Uye for
tax. yrs. begin. after I213In4.
..
, -: ... , ..... , . ' .,
Prior to deletion, diC fmal sentence.jn suj:lsec. '(a) read asfollows.;
"The. Secretary or his ~legate shall, by. JegulatiQD, exempt from tbe
requirement of making returns UDder this section any political committee (as defined in section 301(d) of tbe Federal Election Campaign Act of 1971) having Jl<! gross inco~ for the,taxable year.~.
-Sec. I 0(1), PL. 93-625 provides as follows: . ,
'
"(f) Exemption from filing requirement for prior years. wbelc income of political party was -$100 or. less..
"In the case of a taxable year beginning after December 31,
1971. and before January I, 1975, nothing in the Internal Revenue
Code of 1954 shall be deemed to require any organization described in section 527(e)(l) of such Code to ftle a reblm for. the
taxable year under such Code if such organization would be exempt
from so ftling under section 6012(a)(6) of sucl) Code if such section applied to such taxable year."
In 1974, P.L. 93-443, Sec. 407. added the final sentence to subsec.
(a), effective for tax. yrs. begin. after 12131nL
In 1971, P.L. 92-178. Sec. 204(a), substituted "$750" for "$600"
each place it appeared; substituted "$2,050" for "$1,700" each
place it appeared; substituted "$2,800" for "$2,300" each place it
appeared; and added subpara. (a)(I)(C). effective for tax. yrs, begin.
after 1213Inl.
In 1969, P.L. 91-172, Sec. 94l(a), amended para (a)(l). effective
for tax. yrs. begin. after 12131/69.
..
Prior to amendment para. (a)( I) read as foliows:
"(I) Every individual having for the taxable year a gross income
of $600 or more (except that any individual who bu aaaincd the
age of 65 before the close of his taxable year shall be required 1o
malce a reblm only if he has for the taxable ypr a pou income of
$1,200 Qr more);"
. ,_ ,.:.
-P.L.)l-172, Sec. 941(d), amended para. (a){l) fQr tax. yrs. begin. after 12131f72..
.. ~--:.
.
Ill 1~ PJ... 88-272, amended subsec. (c), e~vo.for dispositiOiiS after.12131/63, in tax. yrs. end. after .1213U62. .
Prior.toameadment,. subsee. (c) read as-foUows: ..., .. c ,,,: ., .
"(e) Certain income eamed. atwoed;. For pirpala ot tbia: ICICIIoa.
gross income shall be computed without regard to lbe emusloa
provided for in scctioli 911 (relalin& to;e.ncd ilx:o- from aoan:es
without the United-Slates).~.
.. ' ,_,_,., ,; .. : .. ,;
SID
[Code of Federal Regulations)

[Paral.l.el. Tabl.e)
[Revised as of January 1, 2003]
[From the U.S. Government Printing Office via GPO Access]
[[Page 741])
PARALLEL TABLE OF AUTHORITIES AND RULES
The following table lists rulemaking authority (except 5 U.S.C. 301)

for regulations codified in the Code of Federal Regulations. Also
included are statutory citations which are noted as being interpreted or
applied by those regulations.
The table is divided into four segments: United States Code citations,
United States Statutes at Large citations, public law citations, and
Presidential document citations. Within each segment the citations are
arranged in numerical order:
For the United States Code, by title and section;
For the United States Statutes at Large, by volume and page number;
For public laws, by number; and
For Presidential documents (Proclamations, Executive orders, and
Reorganization plans), by document number.
Entries in the table are taken directly from the rulemaking authority
citation provided by Federal agencies in their regulations. Federal
agencies are responsible for keeping these citations current and
accurate. Because Federal agencies sometimes present these citations in
an inconsistent manner, the table cannot be considered all-inclusive.
The portion of the table listing the United States Code citations is
the most comprehensive, as these citations are entered into the table
whenever they are given in the authority citations provided by the
agencies. United States Statutes at Large and public law citations are
carried in the table only when there are no corresponding United States
Code citations given.
This table is revised as of January 1, 2003.
26 U.S.C. (1939 I.R.C.)

4 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 509, 513, 514, 520, 521
143--144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 521
211 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 521
231 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 521
2706 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Part 516
2710 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Parts 291
2716 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Part 516
3791 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 509, 520
182
5762--5763 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 45
5801 et seq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 179
5802 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 1, 31, 55, 156
27 Parts 19, 26, 46, 53, 194, 296
6011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 31, 40,55, 156, 301
27 Parts 25, 53, 194
6020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 53, 70
6021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 53, 70
6031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6036 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6038--60388 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6041 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6045 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 1, Sf
6046A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6047 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 35
6049 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6050E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6050H--6050I-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6050K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
60S OM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 1, 301
6050P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6 Part 1
6050S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6051 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 31
6056 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 22
6060 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6061. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 1, 156, 301
27 Parts 22, 25, 44, 53, 194, 270
6064 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6065 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
27 Parts 17--20, 22, 24, 25, 44, 194, 252, 270
6071. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 31, 40, 55, 154, 156
27 Parts 53, 194
6081. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 1, 31, 301
27 Part 53
6090 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 43
6091. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 40, 44, 46, 55, 156
27 Parts 17, 24, 25, 53, 194
6101--6104 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 53
6101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 40
6102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6103 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Parts 401, 402
2 6 Part 301
42 Part 401
6104 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6109 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 40, 150, 301
27 Parts 17, 19, 22, 24, 25, 53, 194, 270
6111 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6112 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6114 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 17, 22, 25, 44, 53, 194, 270
6155 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 53, 70
6157 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 31
6159 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6161 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 156
27 Part 53
183
6201 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6203--6204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6205 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 31
6223 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6230 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6231 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6232 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 41, 150
6233 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6241 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6245 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6301--6303 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 53
6301--6302 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 24--26, 270,
275
6301 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6302 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 1, 20, 25, 31, 40
27 Parts 19, 251
31 Parts 203, 214
6303 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6311 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
27 Parts 19, 24, 25, 53, 70, 194, 270
6313--6314 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6 313 2 7 partS 2 51 4 5 f 2 7 0 f 2 7 5
6314 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 194
6321 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6323 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70, 301
6325 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 401
27 Part 70
6326 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
27 Part 70
6331--6343 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6343 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6401--6404 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6402 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Part 16
12 Part 1730
26 Parts 1, 301
27 Parts 17, 25, 44, 53, 194, 270
31 Part 285
6404 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
27 Parts 44, 53, 270, 275
6407 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6411 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 1, 301
6416 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 53, 70
6423 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Part 24
27 Parts 70, 270
6426 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 154
6427 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 48
6501--6503 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6511 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 17, 70, 194
6513--6514 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6532 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6601--6602 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6601. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 46, 194, 296
6611 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6621--6622 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 46, 70, 296
6621 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 194
6651. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 24, 25, 70, 194
184
Sf
[[Page 785]]
6653 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6656--6658 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6656 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 25
6657 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 194
6662 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6665 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6671--6672 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6676 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 19, 24, 25, 270
6689 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
6695 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6701 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6723 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6801 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6804 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 250
6806 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 19, 22, 25, 44, 270
6851 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 1
6862--6863 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
6901 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7011. . . . . . . . . . . . . . . . . . . . . 27 Parts 17, 19, 22, 24, 25, 44, 70, 194, 270
7025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 197
7101--7102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 26
7101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 70, 72, 275
7102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 26, 70
7121--7122 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7207 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7209 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7212 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 44--46, 270, 275,
296
7213 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 17
7214 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Part 3101
27 Part 70
7216 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
7302 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 24, 252
7304 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7322--7326 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 72
7325 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 270
7326 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 72
7327 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 72
7342 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 24, 25, 44--46, 270, 275,
296
7401 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7403 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7406 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7423--7426 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7429--7430 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7432 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7502--7503 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Parts 24, 70, 270
7502 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
27 Part 53
7505--7506 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7508 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
7508A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part 301
7510 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 19
7513 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Part 70
7520 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Parts 1, 20, 25, 301
185
5iC
Procedure and administration
Regs. 301.7122-1(i)(1)
(i) Statute of limitations. (1) Suspension of the statute of
limitations on collection. The statute of limitations on collection will be suspended while levy is prohibited under paragraph (g)( 1) of this section.
(2) Extension of the statute of limitations on assessment.
For any offer to compromise, the IRS may require, where
appropriate, the extension of the statute of limitations on assessment However, in any case where waiver of the running
of .the statutory. period of limitations on assessment is
sought, the taxpayer must be notified of the right to refuse to
extend the period of limitations. or to limit the extension to
particular issues or particular periods of time.
(j) Inspection with respect to. accepted offers to compromise. For provisions relating to the inspection of returns
and accepted offers to compromise, see section 6103(k)(l).
(k) Effective date. This section applies to offers to compromise pending on or submitted on or after July 18, 2002.
T .D. 9007, 7118f2002.
301.7207-1 Fraudulent returns; statement, or other
documents.
Any person who willfully delivers. or discloses to any officer or employee of the Internal Revenue Service any list,
retum, account, statement, or other document, known by him
to be frauCiulent or to .. be .fatse as.to any material matter,
,skall be'~ not. mc)re. thaD. $1,0QO~ or imprisoned not more
than 1 year, or bOth. Any person reqUired pursuant to section
6047(b) or (c) or, section. 6104(d), to furnish information to
any officer or employee of the Intern31 Revenue Service or
any other .person who willfully furnishes to such officer or
employee of the Internal Revenue Service or such other person any information known by him to be fraudulent or to be
false as to any material matter shall be fined not more than
$1.000, or imprisoned not more than 1 year. or both.
'T;D. 6498, 1M4/60, amend
6/14171, T.D. 8026, S/1'1/SS.
T.D. 6677, 9116/63,
T.D. 7127.
30i.7209-1 Unauthor:iUd use or ~e or stamps.

(a) Any person who buys, .sells, offers for. sale, uses,
transfers, takes or gives in exchange, or pledges or gives in
pledge, except as authorized in the Code or in regulations
made pursuant thereto, any stamp, coupon, ticket, book, or
other device prescribed by the Commissioner under the Code
for the collection or payment of any tax imposed by the
Code, shall, upon conviction thereof, be fined not more than
$1,000, or imprisoned not more than 6 months, or both.
(b) For use or resale of unused documentary stamps, see

paragraph (c) of 43.6802-l of this chapter (Documentary
Stamp Tax Regulations).
T.D. 6498, 10124160.
301.7214-1 Offenses by officers and employees of the

United States.
Any officer or employee of the United States acting in

connection with any revenue law of the United States required to make a written report under the provisions of.section 1214(a)(8) shall $Ubmit such report to the Commissioner, or to a regional commissioner.or district director.
"'
T.D. 6498.' 101'24160.
:.
~.:
187
301.7216-1 Penalty for disclosure or use of tax return

'information.
Caution: The Treasury has not yet amended Reg
301.7216-1 to reflect changes made by P.L. 100647, P.L. 98-369.
(a) In general. Section 7216(a) provides in effect. that, except as provided in section 7216(b), any tax return preparer
(as described in paragraph (b)(2). of this section) who on or
after January 1, 1972, discloses or uses any tax return information (as described in paragraph (b)(3) of this section)
other than for the specific purpose of preparing, assisting in
preparing, or obtaining or providing services in connection
with the preparation of, any tax return of the taxpayer by or
for whom the information was made available to a tax return
preparer, shall be guilty of a misdemeanor, and. upon conviction thereof, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both, together with the
costs of prosecution. Pursuant to section 7216(b), the provisions of section 7216(a) and this paragrapb do not apply to
any disclosure or use permitted under " 301.7216-2 or
301.7216-3. .
(b) Definitions. For purposes only of section 7216 and
-301.7216-1 through 301.7216-3..:-.
(1) Tax returiJ. The term "tax return" means any return
(or amended return) of the income tax imposed by chapter 1
or 2 or the Code, or any declaration (or amended declaration) of estimated tax made under section 60.15 ..
(2) Tax return prejJarer.
_.
.. l
(i) The term tax rettim preparer means any person(A) Who is 'engaged in the business of preparing tax returns,
.
.
. (B) Who is engaged in the bus~s of providing auxiliary
services in connection with the preparation of tax retuQlS,,
(C) Who is remunerated for preparing, or assisting cin preparing, a tax return for any other person, or
(D) Any individual who, as part of his duties or. employment with any person described in (A),. (B), or (C) of this
subdivision, performs services which assist in the preparation
of, or assist in p~;oviding auxiliary services in connection
with the preparation of, a tax return.
For example, assume that a bank is a tax return preparer
within the meaning of (A) of this subdivision and it employs
one individual to solicit the necessary tax return information
for the preparation of a tax return and another individual to
prepare the return on the basis of the information that is furnished. Under these circumstances, both employees are tax
return preparers. Also, for example, a secretary to a tax return preparer who types or otherwise works on returns prepared by the preparer is a tax return preparer.
(ii) A person is engaged in 'the business of preparing tax
returns as described in subdivision (i)(A) of this subpara
graph if, in the course of his business, he holds himself out
to taxpayers as a person who prepares tax returns, whether
or not tax return preparation is his sole business activity and
whether or not he charges a fee for such services.
(iii) A person is engaged in the business of providing auxiliary services in connection with the preparation of tax returns as described in subdivision (i)(B) of this subparagraph
if, in the course of his business, he holds himself out to tali
return pi'eparers or to taxpayers as a person who performs
such auxiliary services, whether or not providing such auxiliary services is his sole business activity and whether. 0[ not
he charges a fee for such services. For example,. a; persOn
part or all of whose business is to provide a computerized
SIC
Procedure and administration
Regs. 301.7216-3(a)(3)
a first taxpayer, in preparing a tax return of a second taxT.D. 7310. 3f27n4.

payer if the tax return preparer has obtained from the first
taxpayer a written consent described in paragraph (b) of this
301.7231-1 Failure to obtain license for collection of
section. See 301.7216-2(b) for disclosure or use in certain
foreign items.
cases without formal consent.
For
provisions relating to the obtaining of a license for
(b) Form of consent. A separate written consent, signed
the collection of foreign items, see section 7001 and
by the taxpayer or his duly authorized agent or fiduciary,
301.7001-1.
must be obtained for each separate use or disclosure authorized in paragraph (a)(l), (2) or (3) of this section and shall
T.D. 6498. 10124/60.
contain{1) The name of the tax return preparer,
44.7262-1 Failure to pay special tax.
(2) The name of the taxpayer,
Any person liable for the special tax who does any act
which makes him liable for such tax, without having paid
(3) The purpose for which the consent is being furnished,
the tax, is, besides being liable for the tax, subject to a fine
(4) The date on which such consent is signed,
of not less than $1,000 and not more than $5,000.
(5) A statement that the tax return information may not be
disclosed or used by the tax return preparer for any purpose
T.D. 6370. 4/3/59.
(not otherwise permitted under 301.7216-2) other than that
301.7269-1 Failure to produce records.
stated in the consent, and
Whoever fails to comply with any duty imposed upon
(6) A statement by the taxpayer, or his agent or fiduciary,
him by section 6018, 6036 (in the case of an executor), or
that he consents to the disclosure or use of such information
6075(a), or, having in his possession or control any record,
for the purpose described in subparagraph (3) of this parafile, or paper, containing or supposed to contain any inforgraph.
mation concerning the estate of the decedent, or, having in
(c) Illustrations. The application of this section may be
his possession or control any property comprised in the
illustrated by the following examples:
gross estate of the decedent, fails to exhibit the same upon
Example (I). In order to stimulate the making of loans, a
request of any officer or employee of the Internal Revenue
bank advertises that it is in the business of preparing tax reService who desires to examine the same in the performance
turns. A taxpayer goes to the bank to have his tax return
of his duties under chapter 11 of the Code (relating to estate
prepared. After the return has been completed by the bank,
taxes) shall be liable to a penalty of not exceeding $500, to
the employee of the bank who obtained the tax return inforbe recovered with costs of suit, in a civil action in the name
mation from the taxpayer explains that the taxpayer owes an
of the United States.
additional $400 in taxes and that the bank's loan department
may be able to offer the taxpayer a loan to pay the tax due.
T.D. 6498. 10124/60.
If the taxpayer decides to accept the opportunity offered to
apply for a loan, the bank must first have the taxpayer exe 301.7272-1 Penalty for failure to register.
cute a written consent described in paragraph (b) of this sec(a) Any person who fails to register with the district direction for the bank to use any of such information which is retor as required by the Code or by regulations issued thereunquired in determining whether to make the tax loan.
der shall be liable to a penalty of $50 except that on and after September 3, 1958, this section shall not apply to persons
Example (2). An individual who sells life insurance and
required to register under subtitle E of the Code, or persons
shares in a mutual fund is also in the business of preparing
engaging in a trade or business on which a special tax is imtax returns. A taxpayer who has gone to the individual to
posed by such subtitle.
have his tax return prepared is requested, at the time he
picks up his completed tax return. to give his consent to the
(b) For provisions relating to registration under sections
individual's use of his tax return information in connection
4101, 4412. 4455, 4722. 4753. and 4804(d), see the regulawith such individual's solicitation of the taxpayer's purchastions relating to the particular tax. For regulations under secing a life insurance policy and shares in the mutual fund.
tion 7011. see 301.7011-1.
Before the individual may use such tax return information as
a basis for soliciting such additional business from the taxT.D. 6498. 10124/60.
payer, the taxpayer must execute separate written consents
under paragraph (b) of this section, one authorizing the use
301.7304-1 Penalty for fraudulently claiming drawof such information as a basis for soliciting the sale of the
back.
mutual fund shares and a second authorizing the use of such
Whenever any person fraudulently claims or seeks to obinformation as a basis for soliciting the sale of the life insurtain an allowance of drawback on goods, wares, or merchanance.
dise on which no internal tax shall have been paid, or fraudulently claims any greater allowance of drawback than the
Example (3). The facts are the same as in example (2) extax actually paid. he shall forfeit triple the amount wrongcept that the individual does not sell life insurance but does
fully or fraudulently claimed or sought to be obtained. or the
sell shares in several mutual funds. If the request is for the
sum of $500, at the election of the district director.
purpose of using the tax return information as a basis for
soliciting the sale at one time of shares in mutual funds A
and B, only one written consent under paragraph (b) of this
T.D. 6498. 10124160.
section is required of the taxpayer. If, however, the request
301.7321-1
Seizure of property.
is for the purpose of using the tax return information as a
basis for soliciting the sale of shares in fund A at one time,
Any property subject to forfeiture to the United States
and the sale of shares in fund B at a later time, two written
under any provision of the Code may be seized by the disconsents under such pacagraph are required of the taxpayer.
trict director or assistant regional commissioner (alcohol and
26,350
188
Department of the Treasury
INTERNAL REVENUE SERVICE
2000
Disclosure, Privacy Act, and Paperwork Reduction Act Notice
he IRS Restructuring and Reform Act of 1998,

the Privacy Act of 1974, and Paperwork
Reduction Act of 1980 require that when we ask you
for Information we must first tell you our legal right to
ask for the information, why we are asking for it, and
how it will be used. We must also tell you what could
happen if we do not receive it and whether your
~response is voluntary. required to obtain a benefit. or
'WI mandatory under the law.
If you do not file a return, do not provide the

information we ask for, or provide fraudulent
information. you may be charged penalties and be
subject to criminal prosecution. We may also have
to disallow the exemptions, exclusions, credits,
deductions, or adjustments shown on the tax return.
This could make the tax higher or delay any refund.
Interest may also be charged.
Generally, tax returns and return information are
confidential, as stated in Code section 61 03 5 .
However, Code section 6103 allows or requires the
Internal Revenue Service to disclose or give the
information shown on your tax return to others as de
scribed in the Code. For example, we may disclose
your tax information to the Department of Justice, to
enforce the tax laws, both civil and criminal, and to
cities, states, .the District of Columbia, U.S.
commonwealths or possessions, and certain foreign
governments to carry out their tax laws. We may
disclose your tax information to the Department of
Treasury and contractors for tax administration
purposes; and to other persons as necessary to obtain
information which we cannot get in any other way in
order to determine the amount of or to collect the tax
you owe. We may disclose your tax information to
the Comptroller General of the United States to permit
the Comptroller General to review the Internal
Revenue Service. We may also disclose your tax
information to Committees of Congress; Federal,
state, and local child support agencies; and to other
Federal agencies for the purposes of determining
entitlement for benefits or the eligibility for and the
repayment of loans.
This notice applies to all papers you file with us,

including this tax return. It also applies to any
questions we need to ask you so we can complete,
correct, or process your return; figure your tax; and
collect tax, interest, or penalties.
Our legal right to ask for information is Internal
Revenue Code sections 60011, 6011 2 , and 6012(a) 3
and their regulations. They say that you must file a
return or statement with us for any tax you are liable

I :>tor. Your response is mandatory under these
sections. Code section 61 09 4 requires that you
provide your social security number or individual
taxpayer identification number on what you file. This
is so we know who you are, and can process your
return and other papers. You must fill in all parts of
the tax form that apply to you. But you do not have
to check the boxes for the Presidential Election
Campaign Fund orfor authorizing the IRS to discuss
your return with the paid preparer shown. You also
do not have to provide your daytime telephone
number.
You are not required to provide the information
requested on a form that is subject to the Paperwork
Reduction Act unless the form displays a valid OMS
control number. Books and records relating to a form
or its instructions must be retained as long as their
contents may become material in the administration
of any Internal Revenue law.
FOOTNOTES: 'Jan. 2000 IRC page 9001. 2Jan. 2000 IRC page 9001.
Jan. 2000 IRC page 9003, Jan. 2000 IRC page 9100. 5Jan. 2000 IRC
page 9074.
We ask for tax return information to carry out the

tax laws of the United States. We need it to figure
and collect the right amount of tax.
This information is taken from: Instructions for

Fonn 2000 1040, Page 56, Cat No. 24811V
U.S. Governments Printing Office: 1997-419-070
Please keep this notice with your records. It may

help you if we ask you for other information. If you
have questions about the rules for filing and giving
information please call or visit any Internal Revenue
Service office.
3
189
NOTE: This Research Foundation form

is not OMB approved.
Form TRF-PAOO, Revised: 01/0312001.
515
11
Rule 611
date, unless the court determines, in the interests of justice, that

the probative value of the conviction supported by specific facts
and circumstances substantially outweighs its prejudicial effect.
However, evidence of a conviction more than 10 years old as calculated herein, is not admissible unless the proponent gives to the
adverse party sufficient advance written notice of intent to use
such evidence to provide the adverse party with a fair opportunity
to contest the use of such evidence.
(c) Effect of pardon, annulment, or certificate of rehabilitation.-Evidence of a conviction is not admissible under this rule
if (1) the conviction has been the subject of a pardon, annulment,
certificate of rehabilitation. or other equivalent procedure based
on a finding of the rehabilitation of the person convicted, and that
person has not been convicted of a subsequent crime which was
punishable by death or imprisonment in excess of one year, or (2)
the conviction has been the subject of a pardon, annulment, or
other equivalent procedure based on a finding of innocence.
(d) Juvenile adjudications.-Evidence of juvenile adjudications
is generally not admissible under this rule. The court may, however, in a criminal case allow evidence of a juvenile adjudication
of a witness other than the accused if conviction of the offense
would be admissible to attack the credibility of an adult and the
court is satisfied that admission in evidence is necessary for a fair
determination of the issue of guilt or innocence.
(e) Pendency of appeaL-The pendency of an appeal therefrom
does not render evidence of a conviction inadmissible. Evidence of
the pendency of an appeal is admissible.
(As amended Mar. 2, 1987, eff. Oct. 1, 1987; Jan. 26, 1990, eff. Dec.
1, 1990.)
Rule 610. Religious Beliefs or Opinions
Evidence of the beliefs or opinions of a witness on matters of religion is not admissible for the purpose of showing that by reason
of their nature the witness' credibility is impaired or enhanced.
(As amended Mar. 2, 1987, eff. Oct. 1, 1987.)
Rule 611. Mode and Order of Interrogation and Presentation
(a) Control by court.-The court shall exercise reasonable control over the mode and order of interrogating witnesses and presenting evidence so as to (1) make the interrogation and presentation effective for the ascertainment of the truth, (2) avoid needless consumption of time, and (3) protect witnesses from harassment or undue embarrassment.
(b) Scope of cross-examination.-Cross-examination should be
limited to the subject matter of the direct examination and matters affecting the credibility of the witness. The court may, in the
exercise of discretion, permit inquiry into additional matters as if
on direct examination.
(c) Leading questions.-Leading questions should not be used on
the direct.examination of a witness except as may be necessary to
develop the witness' testimony. Ordinarily leading questions
should be permitted on cross-examination. When a party calls a
hostile witness, an adverse party, or a witness identified with an
adverse party, interrogation may be by leading questions.
190
"
II a joint ret~rn. spouses
rrst name and onitial
Spouse's soc:ial sealrity number
Last name
E
L
Home address (number and streeU. Wyou have a P.O. box. see page 19.
H
E
Apt. no.
You must enter

your SSN(s) above.
City. town or post olfiCe. state. and ZIP code. If you have a fon!fgn address. see page 19.
You
Note. Checking ves will not change your tax or reduce your refund.
Do ou, or our soouse if filin a oint return. want $3 to
to this funcf?
Married filing joint return (even if only one had income)
Married filing separate return. Enter spouse's social security no. above and
2
3
.,.. Oves 0No Oves 0No

ruu name here . .,.
Head of household (with qualifying person). (See page 19.) If the qualifying person is a child but not your dependent.
Check only
one box.
enter this child's name here. Ill>- - - - - - - - - - - - - - - - - - - - - - - - Qua widow(er) with de endent chUd ears ouse died ..,..
). (See a e 19.)
5
6a
Exemptions
Yourself. If yoLI' parent (or someone else) can claim you as a dependent on his or her tax) Na. ot bales
return. do not check box 6a . . . .
dlected an
S
se . . . . . . . . . . . . . . . . . . . . . . . .
c Dependents:
(1)
r~ name
(2)
Dependent's
social security number
Last name
(3)
Dependent's
relationship
10
141 ~ ~~
::
:e
did ~
----------------------r---~~~---+--------+-~~-_
If more than six

dependents.
see page 20.
-------------r----:---:---+-----+-~0=---
d Total number of
Form(s) 1099-R
if tax was
withheld.
If you did not
get a W-Z.
see page 21.
Enclose, but do
not attach, any
payment Also,
please use
. ,Form 1040-V.
Adjusted
Gross
Income
cllilcen on &c
liho:
lived willl Jllll
did liCit live with
(5ee page ZD)

Oependells Ill 6c
IIIII Cllered lbclwe - -
lines lbcM .,..
claimed
7 Wages, salaries. tips. etc. Attach Fonm(s) W-2

8a Taxable interest. Attach Schedule B if required
Income
Also auac:h
illnd&ll
Na. olJfl"
---------------------r--~--~----+--------+--~0~-Jllllm.~~
0
Ot
sepamian
----------------------~--~---+----~--------r-~0=---
Fonns W-2 and

W-2G here.
Spouse
Filing Status
Attach
Important!
b Tu-exempt interest. Do not include on line 8a

Ordinary dividends. Attach Schedule B if required
10 Taxable refunds. a-edits. or offsets of state and local income taxes (see page 22) .
9
,,
12
13
Alimony received . . . . . . . . . .
Business income or (loss). Attach Schedule C or C-EZ . . . . . .
Capital gain or Poss). Attach Schedule D if required. If not required, check here ..,..
Other gains or (losses). Attach Form 4797 . . . . .
I I
14
15a Total IRA distributions / 15a

b Taxable amot.rlt (see page Zl)
16a
b Taxable am:xn (see page 23)
16a Total pensions w amlities
17 RerUI real estate, royalties, partnerships. S corporations. trusts, etc. Attach Schedule E
18 Farm income or Pass). Attach Schedule F
19 Unemployment compensation . . .
I I b Taxable a11'10111t (see page 251
20a Social searity benefitS I 20a I
Other income. Ust type end amount (see page 251 ................................... ..
Add the
in the
for lines 7
21. This is
income .,.
24
25
26
27
28
29
IRA deduction (see page 27)

Student Joan intereSt deduction (see page 27).
Medical savings account dedu:tion. Attach Form 8853
Moving expenses. Attach Form 3903 . . .
One-half d self-employment tax. Attach Schedule SE
Self-employed health insurance deduction (see page 29)
Self-employed SEP, SIMPLE, and qualified plans
30
Penalty on ear1y withdrawal of savings . .
31a ATIITiorry paid b Recipient's SSN Ill>- _ _.....____,...___ _
32
~
Add lines 23 through 31a

line 32 from ine 22. This
~ For Disclosure, Privacy Act,. and Paperwork
Reduction Act Notice, see page 56.
191
cat. No. 113zoe
Form
1040
(2000)
Farm 1040 (20C)OJ
Tax and
Credits
34
Amount from line 33 (adjusted !;'"OSS income)
3Sa
Check if:
You were 65 or older.
Blind:
Spouse was 65 or older.
Add the number of boxes checked above and enter me total here .
36
for Most
People
Single:
S4.400
Head of
household:
$6.450
Manied filing
jointly or
Qualifying
widow(er):
57.350
Married
Other
Taxes
~ne
36 from line 34
Subtract
If line 34 is S96. 700 or less. multiply $2,800 by tlie total number of exemptions claimed on
line 6d. If line 34 is over S96. 700. see the worksheet on page 32 for the amount to enter ..
Taxable income. Subtract line 38 from line 37. If line 38 is more than line 37. enter .Q.
39
40
Tax (see page 32). Check~ any tax is from a
41
Alternative minimum tax. Anach Form 6251
42
Add lines 40 and 41 .
Foreign tax credit. Anach Form 1116 if required
Form(s) 8814
43
44
Form 4972
Credit for child and dependent care expenses. Attach Fonm 2441
Credit for the elderly or the disabled. Attach Schedule R
Education credits. Attach Form 8863

Child tax credit (see page 36)
48
Adoption credit Attach Form 8839
49
Other. Check if from a
0
0
Form 3800
Form 8396
d
Form (specify) - - - - Add fines 43 through 49. These are your totlll c:redits
If ine
enter -0-
52
Self-employment tax. Attach Schedule SE .
53
Social secllity and Medicare tax on tip income not reported to employer. Attach Form 4137
54
Tax on IRAs. other retirement plans. and MSAs. Attach Form 5329 if required
55
56
Advance earned income c:recfrt payments from Form(s) W-2 .

Household employment taxes. Attach Schedule H
lines 51
59
2000 estimated tax
60a
Eamecl income c:redit (EIC) .

Nontaxable earned income: amount
Payments
Federal income tax withheld from Forms W-2 and 1099
qua !lying
child. attach
Schedule EIC.
payments and amount applied from 1999 retiJ'n

_ .,.. I
61
and type .,.. --------------------------------------------------

Excess social security and RRTA tax withheld (see page SO)
62
Additional child taX credit. AttaCh Form 8812
63
64
65
Amount paid with request for extension to file (see page SO)
Other paymerts. Check If from a
Form 2439 b
Form 4136
Add ln!s
and 61
64.
66
67a
HaYeit
l7
50
Refund
~ 35b
Enter your itemized deductions from Schedule A. line 28. or standard deduction shown
on the lett. But see page 31 to find your standard deduction if you checked any box on
line 35a or 35b or if someone can claim you as a dependent
c: 0 Form 8801
have
38
filing
separately:
45
$3.675
' - - - - - - ' -'6
47
you
b If you are married filing separately and your spouse itemizes deductions. or
you were a dual-status alien. see page 31 and check here . . .
Standard
Oeduaion
If
If fine 65 is more than line 57. subtract line 57 from fine 65. This is the amount you overpaid
. .
~
Amount of line 66 you want refl.a1ded to you
Under penalfies of perpry. I deClare that I 1\ave examined lhis return and accompanying schedUles and statements. and to lhe beSt of rrry lcnowtedge and
belief. IIIey are true. conect. and complete. Declaration of preparer lather than wpa~ is based on all infcnnarion ol whiCh prepare- 1\as any knOwledge.
~~~- ~
YOJ/ signauxe
Date
~copy
Spouse's Signawre. If a joint rettrn. both must sign.
Date
records.
YOJ/ occupation
DaytJme phone !Limber
No
Paid
Preparer's
Use Only
Form
192
1040
(2000)
S2S
Withholding on foreign taxpayers
Code Sec. 1451

est wilhout deduction for any tax which the obligor may be required or pennined to pay thereon, or to retain therefrom under any
law of the United States. the obligor shall deduct and withhold a
tax equal to 2 percent (regardless of whether lbe liability assumed
by the obligor is less than, equal to, or greater than 2 percent) of
the interest on such bonds, mongages, deeds of uusc. or other obligalions, whether such interest is payable annually or at shoner or
longer periods. if payable 10"(I) an iDdiv.idual,
"(2) a pannezsliip, or
"(3) a foreign corporation not engaged in trade or business
within the United Stales.
"(b) Payments to foreigners.
"Notwithslanding subsection (a), if the liability assumed by the
obligor does not exceed 2 percent of the interest, then the deduction
and withholding shall be 31 the rate of 30 percent in the case of"(I) a ~deal alien individual,
"(2) any pannership not engaged in trade or business within the
United StaleS .and composed in whole or in pan of nonresident
alieos, and
"(3) a foreign corporation not engaged in trade or business
within the United States.
"(c) Owner unknown.
"If the OWners of sucb obligations
not known 10 the withholding agent, the Secretary may authorize such deduction and
wilhbalding 10 be 31 the rate of 2 percent, or, if the liability asswncd by the obligor does not exceed 2 percent of the interest, then
31 the rare of 30 percenL
"(d) Benefit of personal cxemptio~s.
"Deduc:lion and withholding under this section shall not be required in the case of a citizen or resident entitled 10 receive such
interest, if he rues with the withholding agent on or before February I a signed notice in writing claiming the benefit of the deduction. for personal exemptions provided in section 151; nor in the
case of a nooreside111 alien individual if so provided for in regulatioos pmraibed by the Secretary UDder sectioo 874.
"(e) A1ieD residellls of Pueno Rico.
"For pwposes of this section, the term 'nonresident alien individual' includes an alien residenl of Pueno Rico.
"(f) Income of obligor and obligee.
.
"The obligor shall not be allowed a deductioo for the payment of
the tax imposed by this subtitle, or any other tax paid punuant to
the tax-free covenant clause, nor shall such tax be included in the
gross income of the obligee."
ln 1976, Pl.. 94-455, Sec. 1906(b)(l3)(A), substituted "Secretary"
for "Secretary or his delegate" in subsecs. (c) and (d), effective
211m.
are
Subchapter B.-Application of Withholding Provisions

Sec.
1461. Liability for withheld tax.
1462. Withheld tax as credit to recipient of income.
1463. Tax paid by recipient of income. ,
1464. Refunds and credits with respect to withheld tax.
1465. Repealed.
ln 1986, P.L. 99-514. Sec. 1899A(73), amended item 1461.
Prior to amendment, item I 461 read as follows:
"1461. Return and payment of withheld tax."
In 1984, P.L. 98-369, Sec. 474(r)(29)(A), redesignated subchapter
Cas B.
In 1976, P.L. 94-455, Sec. 190l(b)(41), deleted item 1465.
Prior to repeal, item 1465 read as follows:
''1465. Definition of withholding agent."
Sec. 1461. Liability for withheld tax.

Every person required to deduct and withhold any tax
under this chapter is hereby made liable for such tax and is
hereby indemnified against the claims and demands of any
person for the amount of any payments made in accordance
with the provisions of this chapter.
ID 1966, P.L. 89-809, Sec. 103,.ameDded Code Sec. 1461, effective
for payments ocauring after 12131/66.
Prior to amendment, Code Sec. 1461 J'Cid as follows:
"SEC. 1461. RlmJRN.AND PAYMENt OF W1J11HE1.D TAX.
"EVCI)I per.IOD requiled IO.deduct Mdwilhbold any tax under this
cbapta' sball. oa 01' before Man:b. IS of e8Ch year, makt retum
tbereof and pay lbc tax 10 the officer designarcd in scctioa 6151.
Evay such person is bereby made liable for sucb tax and is hereby
5,240
indemnified against the claims and demands of any person for the
amount of any payments made in accordance with the provisions of
this chapter."
Sec. 1462. Withheld tax as credit to recipient of income.

Income on which any tax is required to be withheld at the
source under this chapter shall be included in the return of
the recipient of such income, but .any amount of tax so withheld shall be credited against the amount of income tax as
computed in such return.
Sec. 1463. Tax paid by recipient of income.
If(1) any person, in violation of the provisions of this chapter, fails to deduct and withhold any tax under this chapter, and
(2) thereafter the tax against which such. tax . may be
credited is paid,
the tax so required to be deducted and withheld shall not be
collected from such person; but this section shall in no case
relieve such person from liability for interest or any penalties
or additions to the tax otherwise applicable in respect of
such failure to deduct and withhold.
ln 1996, Pl.. 104-188, Sec. 1704(t)(9, substituled "this section"
for "this. subsection", in Code See. 1463, effective 8/20/96.
In 1989, P.L 101-239, Sec. 7743(a), amcinded Code Sec. 1463, ef
fective for failures after 12131189.
Prior 10 ameDdmellt, Code Sec. 1463 read as follows:
"SEC. .J46J_ TAX PAID BY I!ECIPIENT OF INCOME.. . .
. . ..
"II any tax required under this chapccr to be deducted and withheld is paid by the recipient of the income, it shall not be re-<:ol'
lected from the .withholding agcm; nor ill cases in wbic:b the tax is
so paid shall aay peoalty be ,imposed on '1'. collected from the recipient of the
or die withholding agent for failure 10 return
or pay the sami:, unless such failure was fraudulent and for lbc purpose of evading paymenL"
'
""'orne
Sec. 1464. Refunds and credits with respect to withheld

tax.
Where there has been an overpayment of tax under this
chapter, any refund or credit made under chapter 65 shall be
made to the withholding agent unless the amount of such tax
was actually withheld by the withholding agent.
Sec. 1465. Repealed.
In 1976, P.L 94-455, Sec. 190l(a)(156), repealed Code Sec. 1465,

effective for tax. yrs. begin. after '76.
Prior to repeal, Code Sec. 1465 read as follows:
"SEC. 1465. DEflNTilON OF WITHHOlDING AGENT.
'The term 'withholding agent' means any person
CHAPTER 4. REPEALED [RULES APPLICABLE TO

RECOVERY OF EXCESSIVE PROFITS ON GOVERNMENT CONTRACTS]
Subchapter
A. Repealed.
B. Repealed [Mitigation of Effect of Renegotiation of Government Contracts].
In 1990, P.L. 101-508, Sec. 11801(a)(37), repealed Chapter 4,
ln 1976, P.L. 94-455, Sec. 195l(c)(4), deleted the item for Sul>chapter A.
Prior to repeal, that item read as follows:
"A. Recovery of Excessive Profits on Government Contracts...
SUBPART A
REPEALED. [REcOVERY OF ExCESSNE PROFITS
ON GOVERNMENT CONTRACTS) .
Sec
1471. Repealed [Recovery of excessive profits on govern-
ment contracts.]
193
UNITED STATES CODES

Congressional and Administratives
News
96th Congress - Second Session
1980
Convened January 3, 1980

Adjourned December 16, 1980
VOLUMES
LEGISLATIVE HISTORY
[Public Laws 96-472 to 96-522]
ST. PAUL, :MINN.

WEST PUBLISING CO.
194
53
LEGISLATIVE IDSTORY
P.L. 96-511 {PAGE 2]
I. PURPOSE AND SUMMARY

The Paperwork Reduction takes statutory steps needed to reduce and minimize the burden Government
paperwork imposes on the public. The purposes of the bill are to:
(1 )Minimize the Federal paperwork burden for individuals, businesses-in particular,
small business -State and local governments, and other person;
(2) Minimize the cost to the Federal Government of collecting. maintaining, using and
disseminating information;
(3) Maximize the usefulness of information collected;
(4) Coordinate and integrate Federal information policies and practices; and
(5) Ensure that automatic data processing and telecommunications technologies are
acquired and used by the Federal Government to improve service delivery and program
management, increase productivity, and reduce the information processing burden for both the
Government and the public.
The billEstablishes a goal to reduce the 1980 paperwork burden existing today by twenty-five percent
in three years.
Creates an institutional framework to carry out recommendations of the Commission on Federal
Paperwork.
Consolidates within the Director of OMB and the Office of Information and Regulatory Affairs
the following information management policy functions: general information, paperwork clearance,
statistical activities, records management, privacy, and automatic data processing and
telecommunications.
Ensures that paperwork required from the public is first checked to see whether information
requested is:
(1) Needed;
(2) Not duplicative; and
(3) Collected efficiently.
The Director of OMB will be accountable for this checking and will be responsible for preventing
duplicate and unnecessary paperwork burdens.
~
Reguires all information reguests of the public to display a control number. an expiration date.
and indicate why the information is needed. how it will be used. and whether it is a voluntarv or
mandatocy reguest. Reguests which do not reflect a current OMB control number or fail to state why
not. are "bootlee'' reguests and may be ignored by the public.
Establishes a Federal Information Locator System to:
(1) Identify duplication in agencies reporting and record keeping requirements;
(2) Locate existing information that may meet the needs of Congress, executive agencies,
and the public; and
(3) Assist in deciding which agency requests for information collection should be
approved.
Rewrites the original Federal Reports Act of 1942 and eliminates all agency exemptions to the
Act except the Federal Election Commission. A disapproval of an information request of the
6242
195
LEGISLATIVE ffiSTORY
P.L. 96-511 [PAGE 52]
should be available, upon payment of a reasonable fee, to state and local governments, and members
of the general public. The Director is to ensure that no actual data collected by Federal agencies are
contained within the System.
U.S. Public Law 44 USC

Sec. 3512. Public protection
(a) Notwithstanding any other provision of law, no person shall be subject to any
penalty for failing to comply with a collection of information that is subject to this
chapter if -(1) the collection of information does not display a valid control number
assigned by the Director in accordance with this chapter; or
(2) the agency fails to inform the person who is to respond to the collection
of information that such person in not required to respond to the collection of
information unless it displays a valid control number.
(b) The protection provided by this section may be raised in the form of a complete
defense, bar, or otherwise at any time during the agency administrative process or
judicial action applicable thereto.
The purpose of this section is to protect the public from the burden of collections of
information which have not been subjected to the clearance process described by section
3507. Information collection requests which do not display a current control number or, if
not, indicate why not are to be considered "bootleg'' requests and may be ignored by the
public.
Section 3504 (c) (3) (A) requires the Director to ensure that all information collection requests
display a control number. Section 3507 (f) declares that an agency shall not engage in a collection
of information without obtaining from the Director a control number to be displayed. Section
3506 (c) (5) requires each agency to ensure that information collection requests specifically required
by law or to obtain a benefit and submitted to nine or fewer persons contain a statement to inform
the person receiving the request that the request is not subject to the clearance requirements of
section 3507.
~
Section 3542 states, notwithstanding any other provision of law, no person shall be
~subject to any penalty for failing to maintain information for or provide information to any
agency if the information collection request involved was made after December 31, 1981, and
does not display a current control number assigned by the Director, or fails to state that such
request is not subject to this Act. These are the only circumstances under which a person may
justify the failure to maintain information for or provide to any agency otherwise required,
by reliance on this Act.
If an information collection request displays a current control number or states that the
request is not subject to this Act, it is valid for the purposes of this Act.
The protection provided by this section does not go into effect until December 31, 1981 in
order to provide agencies adequate time to comply with the provisions of this Act.
The term "current control number" is used to ensure that the public is also protected from
information collection requests which may display a control number that is expired. Section 3504
(c) (3) (A) mandates that the Director ensure information collection requests display an
expiration date when appropriate. Consistent with the provisions of section 3507 (b), (c), (d),
and (g), all control numbers are to be assigned by the Director and are valid for a period not to
exceed three years.
6292
196
PAPERWORK REDUCTION ACT SUBMISSION

Please read the instruelionS before canpleling lhis tonn. Fi7 addilional forms or assistance in CI:Xl'lpleling 1M form, contac1 your agency's
Paperwork Oearance OffiCe!'. Send I'M> copies of this form. the allleclion instnrnent to be reviewed, the Su~rting Statement. and any
additional ciocumentalion to Office of Information znd Regubtory Affairs, Offace of 1\bnagement and Budget, Docks! Ubrary, Room
10102, 72517111 Street NW, Washington, DC 20503.
1. A,-.ency/Subagency onginating request
2. OMB conb'ol numbef
3. Type ol information collection (check one)
4. Type of review reQuested (check '0.11)
b.
a. _ _ _ _ ----~
a.
b.
New CoHection
a.
RevisiOn of a currently approved colledion
b.
c. l..j Extension of a currently approved colleclron
cO
e.O
C.
0
0
0
FQr 0-f,
----
Regular
Emergency- App10val requested by:__)__)_
Delegated
5. Smali entities
Reinstatement. without change, of a previously app10vec

coUedion for which approval has expired
Will this information collection have a Significant economic impad on a
Reinst.atemen~ with
substantial number or small entities?
change, of a previously approved
colledion for whidl approval has expired
I.
0None
Yes
No
6. Requested expiration date~~
Existing collection il use without an OMS control number

note Item A2 of Supporling Statement inslrvctions
a.
lJ
b. 0 Other: __)_ _
Three years 110m the approval date
7. Trtle
(Agency form number(s) (if appiicable)
S. Keywords
I C. Abs:rad
<:
Affected public (Ma!X primary with p- and an others with TJ

a._ Individuals or households
d. - Farms
b. _ Business or other for-prof1t
e.
Federal Govemmen:
c.
Not-for-orofi! inslitubons
r State. Local, orTrioal Government
12. Obli1alion :o respond (MaiX primary with "P" and all others that apply wittl "'X}
13. Annual reP171ing and recordkeeping hour burden
14. Annual reporting and recordkeepilg cost burden (in thousands of doliars)
1 i.
a.
b.
c.
a. Num!ler or respondents
Voluntary
Required to cbtain or retain benefits
Mandatory
!:
I.
It!!l
i'
I
a. Total annualized capit.aVstartup costs
b. Total annl.l2! responses
b. Tctal annual ccsts (O&M)
.,
1. Percentage of these rest:OOses
collected electronically
c. Total annualized cost nequested

d. Current OMB inventory
"
:. Total annual hours requested
e. Difference
f. Explanation o! ~enence
d. Current OMB invento.-y

e. Difference
0
0
.,
!i
1. Program change
f Expt.anabon of difference
2. Adjus'J'nent
i
I
1. Progam change
2. Adjustment
15. Purpose of information colle:::ion (Mar): primary wittt p- and an others that
apply with "X")
a. _ l>.ppiicalion for benefits
b. _ Progam evaluation
c. _ General puflXlSe statislics
d.
Audit
e. _Program planning or management
r. g _
R~atory
or compiiance
16. Frequency of recordKeeping or reporting (check all that apply)

a.
Recordl<:eeping
C.
Reporting:
t.O
4.0
7. 0
Research
17. Statistical met".exls
b.
Third party discJosune
Onoc..."'aSion
2.
Quarterly
Biennially
5.
6
0
0
0
Semi-annually
Other (describe)
Weekly
30
0
6.
Monthly
Annually
18. Agency contact (person wflo can best answer questions regarding the content
Does this information coUectoon employ statis:ical metrods?

=:JYes
of this sutxnission)
Name:
No
Phone:
OMB 83-1
10/95
i'
197
19. Certification for Paperwork Reduction Act Submissions

On behalf of this Federal agency, I certify that the collection of information
encompassed by this request complies with 5 CFR 1320.9.
NOTE: The text of 5 CFR 1320.9, and the related provisions of 5 CFR
1320.8(b)(3), appear at the end of the instructions. The certification is to
be made with reference to those regulatory provisions as set forth in the
instructions.
The following is a summary of the topics, regarding the proposed collection of
information, that the certification covers:
(a) It is necessary for the proper performance of agency functions;
(b) It avoids unnecessary duplication;
(c) It reduces burden on small entities;
(d) It uses plain, coherent, and unambiguous language that is
understandable to respondents;
(e) Its implementation will be consistent and compatible with current
reporting and recordkeeping practices;
(f) It indicates the retention periods for recordkeeping requirements;
:>(g) It informs respondents of the information called for under 5 CFR
1320.8 (b){3) about:
(i) Why the information is being collected;
: > (ii) Use of information;
(iii) Burden estimate;
: > (iv) Nature of response (voluntary. required for a benefit. or
mandatory);
(v) Nature and extent of confidentiality; and
~(vi) Need to display currently valid OMB control number;
(h)Twas developed by an office that has planned and allocated
resources for the efficient and effective management and use of the
information to be collected (see note in Item 19 of the instructions);
(i) It uses effective and efficient statistical survey methodology (if
applicable); and
U) It makes appropriate use of information technology.
Signature of Senior Official or designee
OMB 83-1
Date
10/95
198
5
Certification Requirement for Paperwork Reduction Act Submissions
5 CFR 1320.9 reads "As part of the agency submission to OMS of a proposed collection of information, the
agency (through the head of the agency, the Senior Official, or their designee) shall certify (and provide a
record supporting such certification) that the proposed collection of information"(a) is necessary for the proper performance of the functions of the agency, including that the
information to be collected will have practical utility;
"(b) is not unnecessarily duplicative of information otherwise reasonably accessible to the agency;
"(c) reduces to the extent practicable and appropriate the burden on persons who shall provide
information to or for the agency, including with respect to small entities. as defined in the Regulatory
Flexibility Act (5 U.S.C. 601 (6)), the use of such techniques as:
I
"(1) establishing differing compliance or reporting requirements or timetables that take into
.,./account the resources available to those who are to respond;
I'
"(2) the clarification. consolidation, or simplification of compliance and reporting requirements; or

collections of information, or any part thereof;
"(3) an exemption from coverage of the collection of information, or any part thereof;
~"(d) is written using plain. coherent. and unambiguous terminology and is understandable to those who
are to respond;
I
I
I'
"(e) is to be implemented in ways consistent and compatible, to the maximum extent practicable, with
the existing reporting and recordkeeping practices of those who are to respond;
"(f) indicates for each recordkeeping requirement the length of time persons are required to maintain the
records specified;
"(g) informs potential respondents of the information called for under 1320.8(b)(3); [see below]
rr:
"(h) has been developed by an office that has planned and allocated resources for the efficient and
effective management and use of the information to be collected. including the processing of the
information in a manner which shall enhance, where appropriate, the utility of the information to agencies
and the public;
I;
"(i) uses effective and efficient statistical survey methodology appropriate to the purpose for which the
information is to be collected; and
j
!
"G) to the maximum extent practicable, uses appropriate information technology to reduce burden and
improve data quality, agency efficiency and responsiveness to the public.
NOTE: 5 CFR 1320.8(b)(3) requires that each collection of information:
"(3) informs and provides reasonable notice to the potential persons to whom the collection of
information is addressed of:
"(i) the reasons the information is planned to be and/or has been collected;
"(ii) the way such information is planned to be and/or has been used to further the proper
performance of the functions of the agency;
"(iii) an estimate, to the extent practicable, of the average burden of the collection (together with
a request that the public direct to the agency any comments concerning the accuracy of this burden
estimate and any suggestions for reducing this burden);
)
~
"(iv) whether responses to the collection of information are voluntarv. require to obtain or retain a
.,./ benefit (citing authority) or mandatory (citing authority);
"(v) the nature and extent of confidentiality to be provided, if any (citing authority); and
~
"(vi) the fact that an agency may not conduct or sponsor'. and a person is not required to respond
~to. a collection of information unless it displays a currently valid OMS control number."
199
10/95
5.3
Instructions For Completing OMS Form 83-1
Please answer all questions and have the
Senior Official or designee sign the form.
These instructions should be used in
conjunction with 5 CFR 1320, which
provides information on coverage,
definitions. and other matters of procedure
and interpretation under the Paperwork
Reduction Act of 1995.
delegated authority.
5. Small entities
1. Agency/Subagency originating request

Provide the name of the agency or
subagency originating the request. For most
cabinet-level agencies. a subagency
designation is also necessary. For noncabinet agencies. the subagency
designation is generally unnecessary.
2. OMS control number

a. If the information collection in this request
has previously received or now has an OMS
control or comment number, enter the
number.
b. Check "None" if the information collection
in this request has not previously received
an OMS control number. Enter the four digit
agency code for your agency.
3. Type of information collection (check
one)
:>
Indicate whether this information collection

will have a significant impact on a
substantial number of small enti:ies. A small
entity may be (1) a small business which is
deemed to be one that is independently
owned and operated and that is not
dominant in its field of operation: (2) a small
organization that is any not-for-profit
enterprise that is independently owned and
operated and is not dominant in its field; or
(3) a small government jurisdiction which is a
government of a city, county, town.
township, school district. or special district
with a population of less than 50.000.
6. Requested expiration date

a. Check "Three years" if the agency
requests a three year approval for the
collection.
b. Check "Other" if the agency requests
approval for less than three years. Specify
the month and year of the requested
expiration date.
7. Title
Provide the official title of the information

a. Check "New collection" when the
collection. If an official title does not exist,
collection has not previously been used or
provide a description which will distinguish
sponsored by the agency.
this collection from others.
b. Check "Revision" when the collection is
8. Agency form number(s) (if applicable)
currently approved by OMB. and the agency
request includes a material change to the
collection instrument, instructions, its
Provide any form number the agency has
assigned to this collection of information.
frequency of collection, or the use to which
the information is to be put.
Separate each form number with a comma.
c. Check "Extension" when the collection is
currently approved by OMB. and the agency
9. Keywords
wishes only to extend the approval past the
current expiration date without making any
Select and list at least two keywords
material change in the collection instrument.
(descriptors) from the "Federal Register
instructions, frequency of collection, or the
Thesaurus of Indexing Terms" that describe
use to which the information is to be put.
the subject area(s) of the information
d. Check "Reinstatement without change"
collection. Other terms may be used but
when the collection previously had OMS
should be listed after those selected from
approval. but the approval has expired or
the thesaurus. Separate keywords with
was withdrawn before this submission was
commas. Keywords should not exceed two
made. and there is no change to the
lines of text.
collection.
e. Check "Reinstatement with change" when
10. Abstract
the collection previously had OMS apf)roval.
but the approval has expired or was
~ Provide a statement. limited to five lines of
/
withdrawn before this submission was made, 'Wtl text. covering the agency's need for the
and there is change to the collection.
information. uses to which it will be put. and
~ f. Check "Existing collection in use
a brief description of the respondents.
i-./ without OMB control number" when the
collection is currentlv in use but does not
11. Affected public
have a currently valid OMS control number.
Mark all categories that apply, denoting the
4. Type of review requested (check one)
primary public with a p and all others that
apply with x:
a. Check "Regular" when the collection is
submitted under 5 CFR 1320.10, 1320.11, or
12. Obligation to respond
1320.12 with a standard 60 day review
schedule.
Mark all categories that apply. denoting the
b. Check "Emergency" when the agency is
primary obligation with a p and all others
submitting the request under 5 CFR 1320.13
that apply with x:
for emergency processing and provides the
required supporting material. Provide the
~ a. Mark "Voluntary" when the response is
date by which the agency requests approval. 'Wtl entirely discretionary and has no direct effect
c. Check "Delegated" when the agency is
on any benefit or privilege for the
submitting the collection under the
respondent.
conditions OMB has granted the agency
b. Mark "Required to obtain or retain
200
'Wtl
benefits" when the response is elective, but

is required to obtain or retain a benefit.
c. Mark "Mandatory" when the respondent
must reply or face civil or criminal sanctions.
13. Annual reporting and recordkeeping

hour burden
a. Enter the number of respondents and/or
recordkeepers. If a respondent is also a
recordkeeper. report the respondent only
once.
b. Enter the number of responses provided
annually. For recordkeepmg as compared to
reporting activity. the number of responses
equals the number of recordkeepers.
b.1. Enter the estimated percentage of
responses that will be submitted/collected
electronically using magnetic media (i.e ..
diskette). electronic mail, or electron1c data
interchange. Facsimile is not considered an
electronic submission.
c. Enter the total annual recordkeeping and
reporting hour burden.
d. Enter the burden hours currently
approved by OMB for this collection of
information. Enter zero (0) for any new
submission or for any collection whose OMB
approval has expired.
e. Enter the difference by subtracting line d
from line c. Record a negative number (d
larger than c) within parentheses.
f. Explain the difference. The difference in
line e must be accounted for in lines 1.1. and
f.2.
f.1. "Program change" is the result of
deliberate Federal government action. All
new collections and any subsequent revision
of existing collections (e.g., the addition or
deletion of questions) are recorded as
program
changes.
f.2. "Adjustmenr is a change that is not the
result of a deliberate Federal government
action. Chances resultina from new
estimates or action not controllable by the
Federal government are recorded as
adjustments.
14. Annual reporting and recordkeeping

cost burden (in thousands of dollars)
The costs identified in this item must exclude
the cost of hour burden identified in Item 13.
a. Enter the total dollar amount of
annualized cost for all respondents of any
associated capital or start-up costs.
b. Enter recurring annual dollar amount of
cost for all respondents associated with
operating or maintaining systems or
purchasing services.
c. Enter total (14.a. I 14.b.) annual reporting
and recordkeeping cost burden.
d. Enter any cost burden currently approved
by OMB for this collection of information.
Enter zero (0) if this is the first submission
after October 1. 1995.
e. Enter the: difference by subtracting lined
!rom line c. Record a negative number (d
larger than c) within parenthesis.
f. Explain the difference. The difference in
line e must be accounted for in lines f.l. and
1.2.
1.1. "Program change" is the result of
deliberate: Federal government action. All
new collections and any subsequent
revisions or changes resulting in cost
changes are recorded as program changes.
10/95
.53~
EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
September 17, 1999

THE DIRECTOR
OMB BULLETIN NO. 99-06

TO THE HEADS OF EXECUTLVE DEPARTMENTS AND AGENCIES
SUBJECT: Fiscal Year 2000 Information Collection Budget
1.
What is the purpose of this Bulletin? This bulletin instructs your Chieflnformation
Officer (CIO) how to prepare and submit information to the OMB Office of Information
and Regulatory Affairs (OIRA) that will be the basis for the Fiscal Year 2000
Information Collection Budget. This annual report describes the information collection
burden imposed by the Federal government on the public, progress of the agencies
towards the burden reduction goals set forth in the Paperwork Reduction Act of 1995
(PRA), and agency actiYities to improve the public's access to Federal information
resources.
2.
\Vhen are responses to the Bulletin due? Submissions are due to OIRA no later than
Friday, December 17, 1999.
3.
Who must respond to this Bulletin? The Chieflnformation Officers from the
following agencies must comply with the requirements of this Bulletin:
Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Depart~ent of Energy
Department ofHealth and Human Senices
Department of Housing and Urban Development
Department of the Interior Department of Justice
Department ofLabor
Department of State
Department of Transportation
:>Department of the Treasurv
Department of Veterans Affairs
Environmental Protection Agency
Federal Acquisition Regulation (FAR Secretariat)
Federal Communications Commission
Federal Deposit Insurance Corporation
- 1-
201
Federal Emergency Management Agency

Federal Energy Regulatory Commission
Federal Trade Commission
National Aeronautics and Space Administration
National Science Foundation
Nuclear Regulatory Commission
Securities and Exchange Commission
Small Business Administration
Social Security Administration
If your agency is not listed here, you do not need to do anything under this Bulletin.
4. \\'hat is the ~overnmentwide Papenvork Reduction Goal for FY 2000? The
Paperwork Reduction Act of 1995 requires OMB to "set an annual Government-wide
goal for the reduction of information collection burdens by at least ... 5 percent during
each ofthe fiscal years 1998, 1999, 2000, and 2001." 44 U.S.C. 3505(a)(l). In
accordance with the Act, and in light of the agencies' statutory and progranunatic
requirements as reflected in prior ICBs, OMB is setting a "Government-wide goal for
the reduction of information collection burdens" for FY 2000 of5%.
5. \Vhat must mv a~encv's submission include? Your CIO is required to submit the
following information:
A. a cover letter describing agency initiatives that have resulted or will result in specific
reductions of burden on the public, with special consideration for reductions
through changes to regulations, particularly where it affects small business, and
through electronic commerce;
B. your agency's Information Collection Budget submission and supporting material,
prepared in accordance with the instructions in Appendix A;
C. data regarding your agency's compliance with the information collection provisions
of the Paperwork Reduction Act, prepared in accordance with the instructions in
Appendix B; and
D. a narrative description of your agency's current plans for the provision of agency
services electronically, including a proposed timetable for implementation,
prepared in accordance with the instructions in Appendix C.
All submissions should be consistent with OMB fiscal and policy guidance.
6. In what format should the CIO provide this information to OMB? OMB would like
this information electronically on a 3.5" diskette along with one paper copy. Please
label the disk with the agency name and the filenames of the submission. Please use the
following file formats.
- 2202
A. Where this Bulletin instructs you to prepare a table, you should submit the table in
one of the following formats, in order of preference:
(1)
Microsoft Excel 97 or earlier;
(2)
Lotus 1-2-3, Release 9 or earlier; or
(3)
A dot-delimited ASCII file (a"." separates each cell in a row).
B. Otherwise, you should submit the information requested in one ofthe following
formats, in order ofpreference:
( l)
WordPerfect, version 8.0 or earlier: or
(2)
MicrosoR Word 97 or earlier.
7.
What is the le~al authoritv under which OMB is reguirin~ this information? This
Bulletin is issued pursuant to the Budget and Accounting Act of 1921, as amended; the
Budget and Accounting Procedures Act of 1950, as amended; and the Paperwork
Reduction Act of 1995.
8.
\\'here must these submissions be delivered? The information required under this
Bulletin must be delivered no later than December 17, 1999, to:
David Rostker
The Office of Information and Regulatory Affairs
The Office of Management and Budget
725 17th Street, TW - Room 10202
Washington, D.C. 20503
9.
'\Viii OMB conduct hearin2s on my aeencv's submission? OMB will schedule, as

needed, hearings with an agency on its progress toward burden reductions goals and
agency compliance with the Paperwork Reduction Act.
10. \Vho should I contact for further information? Questions about specific agency
matters should be directed to the agency's Desk Officer in OMB's Office of
Information and Regulatory Affairs.
Questions about this Bulletin should be directed to David Rostker, tel. (202) 395-3897,
E-mail: David_Rostker@omb.eop.gov.
11. '\\'hen does this Bulletin expire? This Bulletin expires September 30, 2000.
/s/
Jacob J. Lew
Director
Attachments
-3.
203
S.3 (:,
602.101

(2) Eligible organizations interested
in participating in the Internal Revenue Service Tax Counseling for the
Elderly program should request an application from the:
Program Manager. Tax Counseling for the
Elderly. Taxpayer Service Division TX:T:I.
Internal Revenue Service. 1111 Constitution Ave .. N.W .. Washington. DC 20224. (202)
566-4904.
Subpart 1-Use of Penalty Mail in

the Location and Recovery of
Missing Children
SOURCE: T.D. 8848. 64 FR 69398. Dec. 13. 1999.
unless otherwise noted.
601.901
Missing children shown on

penalty mail.
(a) Purpose. To support the national
effort to locate and recover missing
children. the Internal Revenue Service
(IRS) joins other executive departments and agencies of the Government
of the United States in using official
mail to disseminate photographs and
biographical information on hundreds
of missing children.
(b) Procedures for obtaining and disseminating data. (1) The IRS shall pub-
lish pictures and biographical data related to missing children in domestic

penalty mail containing annual tax
forms and instructions. taxpayer information publications. and other IRS
products directed to members of the
public in the United States and its territories and possessions.
(2) Missing children information
shall not be placed on the "Penalty Indicia." "OCR Read Area." "Bar Code
Read Area," and "Return Address"
areas of letter-size envelopes.
(3) The IRS shall accept photographic
and biographical materials solely from
the National Center for Missing and
Exploited Children <National Center).
Photographs that were reasonably current as of the time of the child's disappearance. or those which have been
updated to reflect a missing child's
current age through computer enhancement technique. shall be the only
acceptable form of visual media or pictorial likeness used in penalty mail.
(c) Withdrawal of data. The shelf life
of printed penalty mail is limited to 3
months for missing child cases. The
IRS shall follow those guidelines whenever practicable. For products with an
extended shelf life. such as those related to filing and paying taxes. the
IRS will not print any pictures or biographical data relating to missing- children without obtaining from the National Center a waiver of the 3-month
shelf-life guideline.
(d) Reports and contact official. IRS
shall compile and submit to OJJDP reports on its experience in implementing Public Law 99-87. 99 Stat. 290.
as required by that office. The IRS contact person is: Chief. Business Publications Section <or successor office). Tax
Forms and Publications Division.
Technical
Publications
Branch.
OP:FS:FP:P:3. Room 5613. Internal
Revenue Service. 1111 Constitution
Ave .. NW., Washington. DC 20224.
(e) Period of applicabilit)J. This section
is applicable December 13. 1999 through
December 31. 2002.
[T.D. 8848. 64 FR 69398. Dec. 13. 1999: 65 FR
15862. Mar. 24, 2000]
PART 602-QMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

602.101
OMB Control numbers.

(a) Purpose. This part collects and
displays the control numbers assig-ned
to collections of information in Internal Revenue Service regulations by the
Office of Management and Budget
COMB) under the Paperwork Reduction
Act of 1980. The Internal Revenue Service intends that this part comply with
the requirements of 1320.7(f). 1320.12.
1320.13. and 1320.14 of 5 CFR part 1320
(OMB 1egulations implementing the
Paperwork Reduction Act). for the display of control numbers assigned by
OMB to collections of information in
Internal Revenue Service regulations.
This part does not display control
numbers assigned by the Office of Management and Budget to collections of
information of the Bureau of Alcohol.
Tobacco. and Firearms.
(b) Display.
CFR part or section where identified and
described
1.1(h)-1(e)
1.23-5
141
204
Current
OMB control
No
1545-1654
1545-0074
602.101
CFR part or section where ident1fied and
described
1.25-H
1.25-2T ..
1.25-3T.
1.25-4T.
1.25-5T .... .
1.25-6T .... .
1.25-?T .......... .
1.25-6T .......... .
1.25A-1 ............................ .
1.28-1
1.31-2 ...
1.32-2
1.32-3
1.37-1
1.37-3 ..................... .
1.41-2
1.41-3
1.41-4A ..
1.41-4 (b) and (c).
1.41-4(d)
1.41-8(b) ............ .
1.41-6(d).
1.41-9
1.42-H
1.42-2 .................... .
1.42-5 ....... .
1.42-6
1.42-6 ......................... .
1.42-10
1.42-13
1.42-14.
1.42-17
1.43-3(a)(3)
1.43-3(b)(3)
1.44A-1 ........ ................................ .
1.44A-3
1.446-1
1.45D-1T ....
1.458-1
1.458-2
1.46-1 .................................... .
1.46-3
1.46-4
1.46-5 ........................................ .
1.46-6
1.46-6 '
1.46-9 .................................................... .
1.46-10
1.46-11 .
1.47-1
............................ ..
1.47-3
1.47-4 '
1.47-5.
1.47-6 .
1.48-3 .
1.48-4 .
1.48-5 ........................ .
1.48-6 ..
1.48-12
1.50A-1
1.50A-2 ....
1.50A-3
1.50A-4 ......................... .

Current
CFR part or secton where identified and
OMB control
No.
1545-0922
1545-0930
1545-0922
1545-0930
1545-0922
1545-0930
1545-0922
1545-0922
1545-0922
1545-0922
1545-0922
1545-1630
1545-0619
1545-0074
1545-0074
1545-1575
1545-0074
1545-0074
1545-0619
1545-0619
1545-0074
1545-0074
1545-1625
1545-1625
1545-0732
1545-0619
1545-0984
1545-0988
1545-1005
1545-1357
1545-1102
1545-1102
1545-1102
1545-1357
1545-1423
1545-1357
1545-1292
1545-1292
1545-0068
1545-0074
1545-0219
1545-1765
1545-0879
1545-0152
1545-0123
1545-0155
1545-0155
1545-0155
1545-0155
1545-0155
1545-0155
1545-0155
1545-0118
1545-0155
1545-0166
1545-0155
1545-0166
1545-0155
1545-0123
1545-0092
1545-0099
1545-0155
1545-0808
1545-0155
1545-0155
1545-0155
1545-0155
1545-1783
1545-0895
1545-0895
1545-0895
1545-0895
descnbed
1.50A-5
1.50A-6 .................. ..
1.50A-7
1.508-1'
1.508-2
1.508-3'
1.506-4 ..........
1.508-5
1.51-1 .
1.52-2.
1.52-3
1.56-1 '
1.56(g)-1 .
1.56A-1
1.56A-2
1.56A-3.
1.56A-4.
1.56A-5 ..
1.57-5 ......................... ..
1.58-1
1.58-9(c)(5)(iii)(B) .
1.58-9(e)(3) .
1.61-2 .
1.61-2T ................... .
1.61-4
1.61-15 ..
1.62-2 .. ..
1.63-1 ...... ..
1.67-2T.
1.67-3T .......................... ..
1.67-3.
1.71-1T ........................... .
1.72-4'
1.72-6
1.72-9
1.72-17
1.72-17A
1.72-18
1.74-1
1.79-2
1.79-3 .................... .
1.83-2 .... .
1.83-5
1.83-6 ....
1.103-10 ..
1.103-15AT
1.103-18
1.103(n)-2T ........................... .
1.103(n)-4T .
1.103A-2 ......................... .
1.105-4 .
1.105-5
1.105-6
1.108-4 .
1.108-5
1.110-1
1.117-5
1.118-2 .
1.119-1
1.120-3
1.121-1
1.121-2
1.121-3 ..
1.121-4 ..
1.121-5.
1.127-2
1.132-H
142
205
Current
OMS control
No
1545-0895
1545-0895
1545-0895
1545-0895
1545-0895
1545-0895
1545-0895
1545-0895
1545-0219
1545-0241
1545-0244
1545-0797
1545-0219
1545-0219
1545-0123
1545-1233
1545-0227
1545-0227
1545-0227
1545-0227
1545-0227
1545-0227
1545-0175
1545-1093
1545-1093
1545-0771
1545-0771
1545-0187
1545-0074
1545-1148
1545-0074
1545-0110
1545-0118
1545-1018
1545-0074
1545-0074
1545-0074
1545-0074
1545-0074
1545-0074
1545-0074
1545-1100
1545-0074
1545-0074
1545-0074
1545-0074
1545-1448
1545-0123
1545-0940
1545-0720
1545-1226
1545-0874
1545-0874
1545-0720
1545-0074
1545-0074
1545-0074
1545-1539
1545-1421
1545-1661
1545-0869
1545-1639
1545-0067
1545-0057
1545-0072
1545-0072
1545-0072
1545-0072
1545-0091
1545-0072
1545-0768
1545-0771
602.101
A-llO. Grants and Agreements with Institutions of Higher Education. Hospitals and Other Nonprofit Organizations (41 FR 32016). All applicable provisions of this circular and any existing and further supplements and revisions are incorporated into these regulations and into all cooperative agreements entered into between the Internal Revenue Service and program sponsors.
(2) Additional operating procedures
and instructions may be developed by
the Internal Revenue Service to direct
recipient organizations in carrying out
the provisions of this subpart. such as
instructions for using letters of credit.
Any such operating procedures or instructions will be incorporated into
each cooperative agreement.
(c) Joint funding. Tax Counseling for
the Elderly programs will not be eligible for joint funding. Accordingly. the
Joint Funding Simplification Act of
1974. Pub. L. 93-510, December 5, 1974 (88
Stat. 1604, 42 U.S.C. 4251-4261) and Office of Management and Budget Circular No. A-!11, Jointly Funded Assistance to State and Local Governments
and Nonprofit Organizations (41 FR
32039), will not apply.
(d) Discrimination. No program sponsor shall discriminate against any person providing tax return assistance on
the basis of age, sex. race. religion or
national origin in conducting program
operations. No program sponsor shall
discriminate against any person in providing such assistance on the basis of
sex. race. religion or national origin.
(44 FR 72113. Dec. 13. 1979. as amended at 49
FR 36500. Sept. 18. 1984]
601.806
Solicitation of applications.
(a) Solicitation. The Commissioner of
Internal Revenue or the Commissioner's delegate may. at any time. solicit eligible agencies and organizations to submit applications. Generally. applications will be solicited
and accepted in June and July of each
year. Deadlines for submitting applications and the schedule for selecting
program sponsors will be provided with
application documents.
(I) Before preparing and submitting
an unsolicited application. organizations are strongly encouraged to contact the Internal Revenue Service at
the address provided in paragraph (b)

(2) of this section.
(2) A solicitation of an application is
not an assurance or commitment that
the Internal Revenue Service will enter
into a cooperative agreement. The Internal Revenue Service will not pay
any expenses or other costs incurred by
the applicant in considering. preparing
or submitting an application.
(b) Application. (I) In the application
documents, the Commissioner or the
Commissioner's delegate will specify
program requirements which the applicant must meet.
(2) Eligible organizations interested
in participating in the Internal Revenue Service Tax Counseling for the Elderly program should request an application from the:
Program Manager. Tax Counseling for the
Elderly. Taxpayer Service Division TX:T:I.
Internal Revenue Service. 1111 Constitution Ave .. N.W .. Washington. DC 20224. (202)
566-4904.
PART 602-0MB CONTROl NUMBERS UNDER THE PAPERWORK REDUCTION ACT

602.101
OMB Control numbers.

(a) Purpose. This part collects and
displays the control numbers assigned
to collections of information in Intetnal Revenue Service regulations by the
Office of Management and Budget
(OMB) under the Paperwork Reduction
Act of 1980. The Internal Revenue Service intends that this part (togethet
with 26 CFR GO! 9000) comply with the
requirements of 1320.7(1). 1320.12.
1320.13. and 1320.14 of 5 CFR part 1320
(OMB regulations implementing the
Paperwork Reduction Act), for the display of control numbers assigned by
OMB to collections of information in
Internal Revenue Service regulations.
This part does not display control
numbers assigned by the Office of Management and Budget to collections of
information of the Bureau of Alcohol.
Tobacco. and Firearms.
(b) Cross-reference. For display of control numbers assigned by the Office of
Management and Budget to Internal
Revenue Service collections of information in the Statement of Procedural
145
206
26 CFR Ch. I (4-1-98 Edition)
602.101
Rules (26 CFR part 601). see 26 CFR
601.9000.
CFR part or section where identified and de-
scribed
(c) Display.
CFR part or section where identified and de~
scribed
1.23-5 ...
1.25-H
1.25-2T .................................. .
1.25-3T ......... .
1.25-4T ......
......................... .
1.25-5T ......................................... .
1.25-GT ............................................................ .
1.25-7T ......
1.25-8T ............................................ .
.. .................................... .
1.28-1 ....
1.31-2 ......
1.32-2.
1.37-1 ...
1.37-3 .........
1.41-2
1.41-3 .....
. ................................. .
1.41-4A
....................................... .
1.41-4 (b) and (c) . . ................................ .
141-8(d)
141-9 ...
142-H
142-2.
142-5 .....
1.42-6 .
1.42-8 .....
1.42-10
142-13 ....
1.42-14
1.43-3(a)(3) ................................................. .
1.43-3(b)(3) ....... .
.. ............................................ .
1.44A-1 ....
1.44A-3 .......
........................................ .
1.448-1
1.458-1
1.458-2
1.46-1
1.46-3 .............
1.46-4
1.46-5
1.46-6 ..............
1.46-8 .......................................................... .
1.46-9 ......
................................... .
1.46-10 .....
1.46-11
1.47-1
1.47-3 .
1.47-4
1.47-5
1.47-6
1.48-3
1.48-4
....
. ..................................... .
..................
.......................... .
........
148-5 ....... .
1.48-6 .................
1.48-12 ..
1.50A-1
1.50A-2
1.50A-3 ...... .
1.50A-4
1.50A-5 ..
1.50A-6 ............................................................ .
Current
OMB control No.
1545-0074
1545-0922
1545-0930
1545-0922
1545-0930
1545-0922
1545-0930
1545-0922
1545-0922
1545-0922
1545-0922
1545-0922
1545-0619
1545-0074
1545-0074
1545-0074
1545-0074
1545-0619
1545-0619
1545-0074
1545-0074
1545-0732
1545-0619
1545-0984
1545-0988
1545-1005
1545-1291
1545-1102
1545-1102
1545-1102
1545-1357
1545-1423
1545-1292
1545-1292
1545-0068
1545-0074
1545-0219
1545-0879
1545-0152
1545-0123
1545-0155
1545-0155
1545-0155
1545-0155
1545-0155
1545-0155
1545-0155
1545-0118
1545-0155
1545-0166
1545-0155
1545-0166
1545-0155
1545-0123
1545-0092
1545-0099
1545-0155
1545-0808
1545-0155
1545-0155
1545-0155
1545-0155
1545-0895
1545-0895
1545-0895
1545-0895
1545-0895
1545-0895
1.50A-7 .
1.508-1 .
1.508-2.
1.508-3
1.508-4 ...... .
1.508-5 .
1.51-1 ...
1.52-2 .
1.52-3
1.56-1
1.56(g)-1 .... .
1.56A-1 ...... .
1.56A-2 .. .
1.56A-3 .. .
1.56A-4.
1.56A-5 .............................. .
1.57-5 .
1.58-1
1.58-9(c)(5)(iii)(B) .
1.58-9(e)(3)
1.61-2 .
1.61-2T
1.61-4 .
1.61-15 .. .
1.62-2 .... .
1.63-1
1.67-2T .. .
1.67-3T ... .
1.67-3 .
1.71-H .. .
1.72-4 ... .
1.72-6 .... .
1.72-9 .
1.72-17 ...
1.72-17A
1.72-18 ...
1.74-1
1.79-2 .....
1.79-3
1.83-2 ........ .
1.83-5
1.83-6
1.103-10
1.103-15AT.
1.103-18 ...
1.103(n)-2T ........ .
1.103(n)-4T ..
1.103A-2
1.105-4.
1.105-5.
1.105-6.
1.108(a)-1
1.108(a)-2
1.108(c)-1 ....
1.117-5 .
1.119-1 .
1.120-3 .
1.121-1
1.121-2 .
1.121-3
1.121-4
1.121-5 ...
1.127-2
1.132-H
1.132-2 ..
1.132-2T
1.132-5 ....
146
207
Current
OMB control No
1545-0895
1545-0895
1545-0895
1545-0895
1545-0895
1545-0895
1545-0219
1545-0241
1545-0244
1545-0797
1545-0219
1545-0219
1545-0123
1545-1233
1545-0227
1545-0227
1545-0227
1545-0227
1545-0227
1545-0227
1545-0175
1545-1093
1545-1093
1545-0771
1545-0771
1545-0187
1545-0074
1545-1148
1545-0074
1545-0110
1545-0118
1545-1018
1545-0074
1545-0074
1545-0074
1545-0074
1545-0074
1545-0074
1545-0074
1545-1100
1545-0074
1545-0074
1545-0074
1545-0074
1545-1448
1545-0123
1545-0940
1545-0720
1545-1226
1545-0874
1545-0874
1545-0720
1545-0074
1545-0074
1545-0074
1545-0046
1545-0046
1545-1421
1545-0869
1545-0067
1545-0057
1545-0072
1545-0072
1545-0072
1545-0072
1545-0091
1545-0072
1545-0768
1545-0771
1545-0771
1545-0771
1545-0771
53
1.23-5
by $9.000 plus $6.000) and B is allowed a

$1.600 credit ($4.000 times $6.000 divided
by $9.000 plus $6.000) with respect to the
expenditures attributable to the jointly owned house. C is entitled to a credit of $4.000 with respect to the expenditures attributable to the other house.
(2) Example. The application of this
subparagraph may be illustrated by the
following example:
for by the taxpayer. and the method

used for allocating such labor costs.
[T.D. 7717. 15 FR 57719. Aug. 29. 1980. Redesignated and amended by T.D. 8146. 52 FR 26672.
July 16. 1987]
*1.23-4
Performance
and
standards. [Reserved]
[T.D. 7717. 45 FR 57721. Aug. 29. 1980. Redesignated by T.D. 8146, 52 FR 26672. July 16. 1987]
*1.23-5
Example. A. B. and C each has a separate

principal residence. They agree to finance
jointly the construction of a solar collector.
each providing one-third of the costs and
taking one-third of the output of the collector. Each will separately pay for the costs
of connecting the solar collector with his or
her principal residence. Provided the solar
collector and connection equipment otherwise qualify as renewable energy source
property, A. B. and C will each be considered
to have made renewable energy source expenditures equal to one-third of the cost of
the collector plus his or her separate connection costs. Such expenditures will be subject
to the limitations and other rules separately
applicable to A. B. and C with respect to
each principal residence. such as those with
respect to the $10 minimum (1.23-l(d)(l)).
prior expenditures ( 1.23-l(d)(2)). residential
use (paragraph (g) of this section). and joint
occupancy (paragra.ph (h) of this section).
quality
Certification procedures.
(a) Certification that an item meets the
definition of an energy-conserving component or renewable energy source property.
Upon the request of a manufacturer of

an item pursuant to paragraph (b) of
this section which is supported by
proof that the item is entitled to be
certified, the Assistant Commissioner
(Technical) shall certify (or shall notify the manufacturer that the request
is denied) that:
(1) The item meets the definition of
insulation (see 1.23-2(c)(l)).
an other energy-conserving component
specified in section 23(c)(4) or former
section 44C(c)(4) see ( 1.23-2(d)(4)).
solar energy property (see 1.23-2(f)).
wind energy property (see 1.23-2(g)).
or geothermal energy property (see
1.23-2(h)).
(4) The item meets the definition of a
category of energy-conserving component that has been added to the list of
approved items pursuant to paragraph
(d)(4)(viii) of 1.23-2.
renewable energy source property that
transmits or uses a renewable energy
source that has been added to the list
of approved renewable energy sources
pursuant to paragraph (e)(2) of 1.23-2.
(b) Procedure-(!) In general. A manufacturer of an item desiring to apply
under paragraph (a) shall submit the
application to the Commissioner of Internal Revenue. Attention: Associate
Chief Counsel (Technical). CC:C:E. 1111
Constitution Avenue NW .. Washington.
DC 20224. Upon being advised by the
National Office. orally or in writing.
that an adverse decision is contemplated a manufacturer may request
a conference. The conference must be
(k) Basic adjustments. If a credit is allowed under section 23 or former section 44C for any expenditure with respect to any property. the increase in
the basis of that property which would
(but for this paragraph) result from
such expenditure shall be reduced by
the amount of the credit allowed.
(l) Recordkeeping-(l) In general. No
residential energy credit is allowable
unless the taxpayer maintains the records described in paragraph (1)(2) of
this section. The records shall be retained so long as the contents thereof
may become material in the administration of any internal revenue law.
(2) Records. The taxpayer must maintain records that clearly identify the
energy-conserving components and renewable energy source property with
respect to which a residential energy
credit is claimed, and substantiate
their cost to the taxpayer. any labor
costs properly allocable to them paid
49
208
1.23-6
26 CFR Ch. I (4-l-Q3 Edition)
held within 21 calendar days from the

date of that advice. Procedures for requesting an extension of the 21-day period and notifying the manufacturer of
the Service's decision on that request
are the same as those applicable to
conferences on ruling requests by taxpayers (see section 9.05 of Rev. Proc.
80--20).
(2) Contents of application. The application shall include a description of
the item (including appropriate design
drawings and specifications) and an explanation of the purpose and function
of the item. There shall accompany the
application a declaration in the following form: "Under penalties of perjury. I declare that I have examined
this application. including accompanying documents and. to the best of
my knowledge and belief, the facts presented in support of the application are
true. correct. and complete.'' The
statement must be signed by the person or persons making the application.
(c) Effect of certification under paragraph (a). Certifications granted under
paragraph (a)(l). (2). or (3) will be applied retroactively to April 20. 1977.
However. certifications granted under
paragraph (a) (4) or (5) will be applied
retroactively only to the date the applicable energy-conserving component
or renewable energy source was added
by Treasury decision to the list of
qualifying components or sources. Certification of an item under this section
means that the applicable definitional
requirement of 1.23-2 is considered
satisfied in the case of any person
claiming a residential energy credit
with respect to such item. However, it
does not relieve manufacturers of the
need to establish that their items conform to performance and quality standards (if any) provided under 1.23-4 and
that their items can reasonably be expected to remain in operation at least
3 years, in the case of insulation and
other energy-conserving components.
or at least 5 years, in the case of renewable energy source property.
[T.D. 7717. 45 FR 57721. Aug. 29. 1980. Redesignated and amended by T.D. 8146. 52 FR 26672.
July 16. 1987)
50
209
Procedure and criteria for additions to the approved list of energy-conserving components or renewable energy sources.
1.23-6
(a) Procedures for additions to the list

of energy-conserving components or renewable energy sources-(1) In general. A
manufacturer of an item (or a group of

manufacturers) desiring to apply for
addition to the approved list of energyconserving components or renewable
energy sources pursuant to paragraph
(d)(4)(viiil or (e)(2) of 1.23-2 shall submit an application to the Internal Revenue Service. Attention: Associate
Chief Counsel <Technical). CC:C:E. 1111
Constitution Avenue. NW.. Washington. DC 20224. The term "manufacturer" includes a person who assembles
an item or a system from components
manufactured by other persons. The
application shall provide the information required under paragraph (b) of
this section. An application may request that more than one item be
added to the approved Jist. It will be
the responsibility of the Office of the
Associate Chief Counsel <Technical)
upon receipt of the application to determine whether all the information
required under paragraph (b) of this
section has been furnished with the application. If an application lacks essential information. the applicant will be
advised of the additional information
required. If the information <or a reasonable explanation of the reason why
the information cannot be made available) is not forthcoming within 30 days
of the date of that advice. the application will be closed and the applicant
will be so informed. Any resubmission
of information beyond the 30-day period will be treated as a new application. If the Office of the Associate
Chief Counsel (Technical) already is
considering an application with respect
to the same or a similar item. it may
consolidate applications. The Office of
the Associate Chief Counsel will mal{e
a report and recommendation to the ad
hoc advisory board as to whether each
item that is the subject to an application should be added in accordance
with the manufacturer's request to the
approved list of energy-conserving
components or renewable
energy
Form
OMB No. 1545-0067
2555
Foreign Earned Income

.,._ See separate instructions.
Department or the Treasury

Internal Revenue Servrce
(99)
For Use b
~@03
.,._ Attach to Form 1040.
Attachment
Sequence No.
Name shown on Form 1040
1@11
34
U.S. Citizens and Resident Aliens Onl

Your social security number
General Information
Your foreign address (including country)
3
4a
b
5
Employer's name .,.. .............................................................................. _................... _................. .

Employer's U.S. address.,.. ............................................................................................................ .
Employer's foreign address .,.. ......................................................................................................... .
Employer is (check ..
a 0 A foreign entity
b 0 A U.S. company
c 0 Self
any that apply):
d 0 A foreign affiliate of a U.S. company
e 0 Other (specify) ............................. ..
If, after 1981, you filed Form 2555 to claim either of the exclusions or Form 2555-EZ to claim the foreign earned income
exclusion, enter the last year you filed the form . .,.. .................................. _.............................................. .
If you did not file Form 2555 or 2555-EZ after 1981 to claim either of the exclusions, check here.,.. 0 and go to line 7.
Have you ever revoked either of the exclusions?
0 Yes 0 No
If you answered "Yes," enter the type of exclusion and the tax year for which the revocation was effective . .,..
Of what country are you a citizen/national? .,.. . _............. _....................... ___ ................................. ..
Did you maintain a separate foreign residence for your family because of adverse living conditions at your
0 Yes 0 No
tax home? See Second foreign household on page 3 of the instructions .
If "Yes." enter city and country of the separate foreign residence. Also. enter the number of days during your tax year that
you maintained a second household at that address . .,.. ..................................... _........ _............... _. _........... .
List your tax home(s) during your tax year and date(s) established . .,.. .............................................. _............. .
Ga
b
c
d
7
Sa
b
2 Your occupation
Next, complete either Part II or Part Ill. If an item does not apply, enter "NA." If you do not give
the information asked for, any exclusion or deduction you claim may be disallowed.
1@111
10
11
12a
b
13a
b
14
Taxpayers Qualifying Under Bona Fide Residence Test (See page 2 of the instructions.)
Date bona fide residence began .,.. ........................................ , and ended .,.. .............................. ..
Kind of living quarters in foreign country .,.. a 0 Purchased house b 0 Rented house or apartment c 0 Rented room
d 0 Quarters furnished by employer
Did any of your family live with you abroad during any part of the tax year?
0 Yes 0 No
If "Yes," who and for what period? .,.. .................................................................................................. .
Have you submitted a statement to the authorities of the foreign country where you claim bona fide residence
0 Yes 0 No
that you are not a resident of that country? (See instructions.) .
Are you required to pay income tax to the country where you claim bona fide residence? (See instructions.) 0 Yes 0 No
If you answered "Yes" to 13a and "No" to 13b, you do not qualify as a bona fide resident. Do not complete the rest of
this part.
If you were present in the United States or its possessions during the tax year. complete columns (a)-(d) below. Do not
include the income from column (d) in Part IV. but report it on Form 1040.
(a) Date
arrived in U.S.
(b) Date left
u.s.
(c) Number of
days in U.S.
on business
(d) Income earned in

U.S. on business
(attach computation)
(a) Date
arnved in U.S.
(b) Date left

U.S
(c) Number of
days in U.S.
on busmess
(d) Income earned m

U.S. on busmess
(attach computatron)
15a List any contractual terms or other conditions relating to the length of your employment abroad . .,.. ........................... .
b
c
d
e
Enter the type of visa under which you entered the foreign country . .,.. .............................. _................ __ ..... _.... .
Did your visa limit the length of your stay or employment in a foreign country? If "Yes," attach explanation 0 Yes 0 No
Did you maintain a home in the United States while living abroad?.
0 Yes 0 No
If "Yes," enter address of your home. whether it was rented. the names of the occupants. and their relationship
to you . .,.. ................................................................................................... -- ........ -. - ... -- ... .
For Paperwork Reduction Act Notice, see page 4 of separate instructions.
210
Cat. No. 11900P
Form
2555
(2003)
Form 2555 (2003)
1@1111
Page
Taxpayers Qualifying Under Physical Presence Test (See page 2 of the instructions.)
16
17
The physical presence test is based on the 12-month period from ~ ------------------------ through~ -----------------------Enter your principal country of employment during your tax year. ~ _______________________________________________________________ .
18
If you traveled abroad during the 12-month period entered on line 16. complete columns (a)-(f) below. Exclude travel between
foreign countries that did not involve travel on or over international waters. or in or over the United States. for 24 hours or
more. If you have no travel to report during the period. enter "Physically present in a foreign country or countries for the entire
12-month period." Do not include the income from column (f) below in Part IV. but report it on Form 1040.
(a) Name of country
(including U.S.)
I@IQI
(b) Date arrived
(c) Date left
(d) Full days
(e) Number of
present in
country
days in U.S.
on bustness
(0 Income earned tn U.S.

on bustness (attach
computatiOn)
All Taxpayers
Note: Enter on lines 19 through 23 all income. including noncash income. you earned and actually or constructively received during
your 2003 tax year for services you performed in a foreign country If any of the foreign earned income received this tax year
was earned in a prior tax year. or will be earned in a later tax year (such as a bonus). see the instructions. Do not include
income from line 14, column (d), or line 18. column (f). Report amounts in U.S. dollars. using the exchange rates in effect
when you actually or constructively received the income.
If you are a cash basis taxpayer, report on Form 1040 all income you received in 2003, no matter when you performed
the service.
Amount
(in U.S. dollars)
2003 Foreign Earned Income

19
19
20
Total wages. salaries. bonuses. commissions. etc.

Allowable share of income for personal services performed (see instructions):
a In a business (including farming) or profession .
b In a partnership. List partnership's name and address and type of income. ~
21
Noncash income (market value of property or facilities furnished by employer-attach statement

showing how it was determined):
a Home (lodging)
b Meals
c Car
d Other property or facilities. List type and amount.~------------------------------------------------
22
a
b
c
d
e
f
Allowances. reimbursements. or expenses paid on your behalf for services

Cost of living and overseas differential
Family
Education
Home leave
Quarters.
For any other purpose. List type and amount. ~ ---------------------22f
performed:
g Add lines 22a through 22f .

23
Other foreign earned income. List type and amount.
23
24
24
Add lines 19 through 21 d, line 22g. and line 23
25
26
Total amount of meals and lodging included on line 24 that is excludable (see instructions) .
Subtract line 25 from line 24. Enter the result here and on line 27 on page 3. This is your 2003
fore n earned income
~
Form
211
2555
(2003)
Form 2555 (2003)
l:tfii!J
27
30
31
32
33
34
All Taxpayers
Taxpayers Claiming the Housing Exclusion and/or Deduction
Qualified housing expenses for the tax year (see instructions) .

Number of days in your qualifying period that fall within your 2003 tax
year (see instructions)
Multiply $30.77 by the number of days on line 29. If 365 is entered on line 29, enter $11,233.00 here
Subtract line 30 from line 28. If the result is zero or less, do not complete the rest of this part
or any of Part IX .
Enter employer-provided amounts (see instructions) .
Divide line 32 by line 27. Enter the result as a decimal (rounded to at least three places), but do
not enter more than "1.000"
Housing exclusion. Multiply line 31 by line 33. Enter the result but do not enter more than the
amount on line 32. Also, complete Part VIII
. .,..
Note: The housing deduction is figured in Part IX. If you choose to claim the foreign earned
income exclusion, complete Parts VII and VIII before Part IX.
I@IWI
Maximum foreign earned income exclusion
36
If you completed Part VI. enter the number from line 29.
36
All others, enter the number of days in your qualifying period that
fall within your 2003 tax year (see the instructions for line 29).
If line 36 and the number of days in your 2003 tax year (usually 365) are the same, enter "1.000 "
Otherwise, divide line 36 by the number of days in your 2003 tax year and enter the result
as a decimal (rounded to at least three places).
Multiply line 35 by line 37 .
Subtract line 34 from line 27
Fo
earned income exclusion. Enter the smaller of line 38 or line 39. Also, rnrnniPtP
38
39
40
lifii!JI!I
41
42
Taxpayers Claiming the Foreign Earned Income Exclusion
35
37
Enter the amount from line 26

Are you claiming the housing exclusion or housing deduction?
0 Yes. Complete Part VI.
0 No. Go to Part VII.
l@i!JI
28
29
Page
Taxpayers Claiming the Housing Exclusion, Foreign Earned Income Exclusion, or Both
Add lines 34 and 40

Deductions allowed in figuring your adjusted gross income (Form 1040, line 34) that are allocable
to the excluded income. See instructions and attach computation
41
42
Subtract line 42 from line 41. Enter the result here and in parentheses on Form 1040, line 21.
Next to the amount enter "Form 2555." On Form 1040, subtract this amount from your income
.
to arrive at total income on Form 1040, line 22.
43
Taxpayers Claiming the Housing Deduction Complete this part only if (a) line 31 is more than line
lifiilt;t
34 and
line 27 is more than line 41.
43
....
44
44
45
45
46
Enter the smaller of line 44 or line 45 .

Note: If line 45 is more than line 46 and you could not deduct all ofyour 2002 housing deduction
because of the 2002 limit, use the worksheet on page 4 of the instructions to figure the
amount to enter on line 4 7. Otherwise, go to line 48.
47
Housing deduction carryover from 2002 (from worksheet on page 4 of the instructions) .
48
Housing deduction. Add lines 46 and 47. Enter the total here and on Form 1040 to the left of
line 33. Next to the amount on Form 1040, enter "Form 2555." Add it to the total adjustments
rted on that line
. .,..
Form
212
2555
(2003)
~@03
Instructions for Form 2555

Internal Revenue Service
Foreign Earned Income

Section references are to the Internal Revenue Code.
General Instructions
Do not include on Form 1040, line

61 (Federal income tax withheld),
any taxes a foreign employer
withheld from your pay and paid to the
foreign country's tax authority instead of
to the U.S. Treasury.
Purpose of Form
If you are a U.S. citizen or a U.S. resident
alien living in a foreign country, you are
subject to the same U.S. income tax laws
that apply to citizens and resident aliens
living in the United States. But if you
qualify, use Form 2555 to exclude a
limited amount of your foreign earned
income. Also, use it to claim the housing
exclusion or deduction. You may not
exclude or deduct more than your foreign
earned income for the tax year.
You may be able to use Form
2555-EZ, Foreign Earned Income
Exclusion, if none of your foreign earned
income was from self-employment, your
total foreign earned income did not
exceed $80,000, you do not have any
business or moving expenses, and you
do not claim the housing exclusion or
deduction. For more details, see Form
2555-EZ and its separate instructions.
Foreign country. A foreign country is
any territory (including the air space ..
territorial waters. seabed, and subso1l)
under the sovereignty of a government
other than the United States. It does not
include U.S. possessions or territories.
Note: Specific rules apply to determine if
you are a resident or nonresident alien of
the United States. See Pub. 519, U.S.
Tax Guide for Aliens, for details.
Who Qualifies
You qualify for the tax benefits available
to taxpayers who have foreign earned
income if both 1 and 2 apply.
1. You meet the tax home test (see

below).
2. You meet either the bona fide
residence test (see page 2) or the
physical presence test (see page 2).
Note: If your only earned income from
work abroad is pay you received from the
U.S. Government as its employee, you do
not qualify for either of the exclusions or
the housing deduction. Do not file Form
2555.
Tax home test. To meet this test, your
tax home must be in a foreign country, or
countries, throughout your period of bona
fide residence or physical presence,
whichever applies. For this purpose, your
period of physical presence is the 330 full
days during which you were present in a
foreign country, not the 12 consecutive
months during which those days
occurred.
Your tax home is your regular or
principal place of business, employment,
or post of duty, regardless of where you
maintain your family residence. If you do
not have a regular or principal place of
business because of the nature of your
trade or business, your tax home is your
regular place of abode (the place where
you regularly live).
You are not considered to have a tax
home in a foreign country for any period
during which your abode is in the United
States. However, if you are temporarily
present in the United States, or you
maintain a dwelling in the United States
(whether or not that dwelling is used by
your spouse and dependents), it does not
necessarily mean that your abode is in
the United States during that time.
Example. You are employed on an
offshore oil rig in the territorial waters of a
foreign country and work a 28-day on/
28-day off schedule. You return to your
family residence in the United States
during your off periods. You are
List of Countries To Which Travel Restrictions Apply

Time Periods
Country
Beginning
Cuba
January 1, 1987
August 2, 1990
January 1, 1987
Iraq
Libya
and
Ending
Still in effect
Still in effect
Still in effect
"Individuals whose activities 1n Iraq are permitted by a specific or general license issued by the Office of Fore1gn
Assets Control are not in violation of U.S. law. Accordingly, the restriction does not apply to such lndiVIOUals w1th
respect to the activities permitted by the license.
Cat. No. 11901A
213
considered to have an abode in the

United States and do not meet the tax
home test. You may not claim either of
the exclusions or the housing deduction.
Violation of Travel Restrictions

Generally, if you were in a foreign country
in violation of U.S. travel restrictions. the
following rules apply:
1. Any time spent in that country may
not be counted in determining if you
qualify under the bona fide residence or
physical presence test,
2. Any income earned in that country
is not considered foreign earned income.
and
3. Any housing expenses in that
country (or housing expenses for your
spouse or dependents in another country
while you were in that country) are not
considered qualified housing expenses.
See the list on this page for countries
to which U.S. travel restrictions apply.
Additional Information
Pub. 54, Tax Guide for U.S. Citizens and
Resident Aliens Abroad, has more
information about the bona fide residence
test, the physical presence test, the
foreign earned income exclusion. and the
housing exclusion and deduction. You
can get this publication from most U.S.
embassies and consulates or by writing
to: Eastern Area Distribution Center. P.O.
Box 85074, Richmond, VA 23261-5074.
You can also download this publication
(as well as other forms and publications)
from the IRS website at www.irs.gov.
Waiver of Time Requirements

If your tax home was in a foreign country
and you were a bona fide resident of. or
physically present in, a foreign country
and had to leave because of war. civil
unrest, or similar adverse conditions. the
minimum time requirements specified
under the bona fide residence and
physical presence tests may be waived.
You must be able to show that you
reasonably could have expected to meet
the minimum time requirements if you had
not been required to leave. Each year the
IRS will publish in the Internal Revenue
Bulletin a list of countries and the dates
they qualify for the waiver. If you left one
of the countries during the period
indicated, you can claim the tax benefits
on Form 2555, but only for the number of
days you were a bona fide resident of. or
physically present in, the foreign country.
If you can claim either of the

exclusions or the housing deduction
because of the waiver of time
requirements, attach a statement to your
return explaining that you expected to
. meet the applicable time requirement, but
the conditions in the foreign country
prevented you from the normal conduct of
business. Also, enter "Claiming Waiver" in
the top margin on page 1 of your 2003
Form 2555.
When To File
A 2003 calendar year Form 1040 is
generally due April 15, 2004.
However, you are automatically
granted a 2-month extension of time to
file (to June 15, 2004. for a 2003 calendar
year return) if, on the due date of your
return, you live outside the United States
and Puerto Rico and your tax home
(defined on page 1) is outside the United
States and Puerto Rico. If you take this
extension, you must attach a statement to
your return explaining that you meet
these two conditions.
The automatic 2-month extension also
applies to paying the tax. However,
interest is charged on the unpaid tax from
the regular due date (April 15, 2004, for a
2003 calendar year return) until it is paid.
Special extension of time. The first year
you plan to take the foreign earned
income exclusion and/or the housing
exclusion or deduction, you may not
expect to qualify until after the automatic
2-month extension period described
earlier. If this occurs, you may apply for
an extension to a date after you expect to
qualify.
To apply for this extension. complete
and file Form 2350, Application for
Extension of Time To File U.S. Income
Tax Return, with the Internal Revenue
Service Center, Philadelphia, PA 19255,
before the due date of your return.
Interest is charged on the tax not paid by
the regular due date as explained earlier.
Choosing the Exclusion(s)

To choose either of the exclusions,
complete the appropriate parts of Form
2555 and file it with your Form 1040 or
Form 1040X, Amended U.S. Individual
Income Tax Return. Your initial choice to
claim the exclusion must usually be made
on a timely filed return (including
extensions) or on a return amending a
timely filed return. However, there are
exceptions. See Pub. 54 for details.
Once you choose to claim an
exclusion, that choice remains in effect for
that year and all future years unless it is
revoked. To revoke your choice, you must
attach a statement to your return for the
first year you do not wish to claim the
exclusion(s). If you revoke your choice,
you may not claim the exclusion(s) for
your next 5 tax years without the approval
of the Internal Revenue Service. See
Pub. 54 for more information.
Earned income credit. You cannot take
the earned income credit if you claim
either of the exclusions or the housing

deduction.
Specific Instructions
Part II
Bona Fide Residence Test
To meet this test, you must be one of the
following:
A U.S. citizen who is a bona fide
resident of a foreign country, or countries,
for an uninterrupted period that includes
an entire tax year (January 1-December
31, if you file a calendar year return) or
A U.S. resident alien who is a citizen or
national of a country with which the
United States has an income tax treaty in
effect and who is a bona fide resident of a
foreign country, or countries, for an
uninterrupted period that includes an
entire tax year (January 1-December
31, if you file a calendar year return). See
Pub. 901, U.S. Tax Treaties, for a list of
countries with which the United States
has an income tax treaty in effect.
No specific rule determines if you are a
bona fide resident of a foreign country
because the determination involves your
intention about the length and nature of
your stay. Evidence of your intention may
be your words and acts. If these conflict,
your acts carry more weight than your
words. Generally, if you go to a foreign
country for a definite, temporary purpose
and return to the United States after you
accomplish it, you are not a bona fide
resident of the foreign country. If
accomplishing the purpose requires an
extended. indefinite stay, and you make
your home in the foreign country, you
may be a bona fide resident. See Pub. 54
for more information and examples.
Lines 13a and 13b. If you submitted a
statement of nonresidence to the
authorities of a foreign country in which
you earned income and the authorities
hold that you are not subject to their
income tax laws by reason of
nonresidency in the foreign country, you
are not considered a bona fide resident of
that country.
If you submitted such a statement and
the authorities have not made an adverse
determination of your nonresident status,
you are not considered a bona fide
resident of that country.
Part Ill
Physical Presence Test
To meet this test, you must be a U.S.
citizen or resident alien who is physically
present in a foreign country, or countries.
for at least 330 full days during any
period of 12 months in a row. A full day
means the 24-hour period that starts at
midnight.
To figure the minimum of 330 full days'
presence, add all separate periods you
were present in a foreign country during
the 12-month period shown on line 16.
-2-
214
The 330 full days may be interrupted by

periods when you are traveling over
international waters or are otherwise not
in a foreign country. See Pub. 54 for more
information and examples.
Note: A nonresident alien who, with a
U.S. citizen or U.S. resident alien spouse.
chooses to be taxed as a resident of the
United States may qualify under this test
if the time requirements are met. See
Pub. 54 for details on how to make this
choice.
Part IV
Enter in this part the total foreign earned
income you earned and received
(including income constructively received)
during the tax year. If you are a cash
basis taxpayer, report on Form 1040 all
income you received during the tax year
regardless of when you earned it.
Income is earned in the tax year you
perform the services for which you
receive the pay. But if you are a cash
basis taxpayer and, because of your
employer's payroll periods, you received
your last salary payment for 2002 in 2003.
that income may be treated as earned in
2003. If you cannot treat that salary
payment as income earned in 2003, the
rules explained under Income earned in
prior year on page 3 apply. See Pub. 54
for more details.
Foreign earned income for this
purpose means wages, salaries.
professional fees, and other
compensation received for personal
services you performed in a foreign
country during the period for which you
meet the tax home test and either the
bona fide residence test or the phys1ca1
presence test. It also includes noncash
income (such as a home or car) and
allowances or reimbursements.
Foreign earned income does not
include amounts that are actually a
distribution of corporate earnings or
profits rather than a reasonable allowance
as compensation for your personal
serVices. It also does not include the
following types of income.
Pension and annuity income (mclud1ng
social security and railroad retirement
benefits treated as social security).
Interest. ordinary dividends, capital
gains, alimony, etc.
Portion of 2002 moving expense
deduction allocable to 2003 that is
included in your 2003 gross income. For
details, see Moving Expense
Attributable to Foreign Earnings in 2
Years under Moving Expenses in
Pub. 54.
Amounts paid to you by the U.S.
Government or any of its agencies if you
were an employee of the U.S.
Government or any of its agenc1es.
Amounts received after the end of the
tax year following the tax year in which
you performed the services.
Amounts you must include in gross
income because of your employer's
contributions to a nonexempt employees'

trust or to a nonqualified annuity contract.
Income received in prior year. Foreign
earned income received in 2002 for
services you performed in 2003 may be
excluded from your 2002 gross income if,
and to the extent, the income would have
been excludable if you had received it in
2003. To claim the additional exclusion,
you must amend your 2002 tax return. To
do this, file Form 1040X.
Income earned in prior year. Foreign
earned income received in 2003 for
services you performed in 2002 may be
excluded from your 2003 gross income if,
and to the extent, the income would have
been excludable if you had received it in
2002.
If you are excluding income under this
rule, do not include this income in Part
IV. Instead, attach a statement to Form
2555 showing how you figured the
exclusion. Enter the amount that would
have been excludable in 2002 on Form
2555 to the left of line 43. Next to the
amount enter "Exclusion of Income
Earned in 2002." Include it in the total
reported on line 43.
Note: If you claimed any deduction,
credit, or exclusion on your 2002 return
that is definitely related to the 2002
foreign earned income you are excluding
under this rule, you may have to amend
your 2002 income tax return to adjust the
amount you claimed. To do this, file Form
1040X.
Line 20. If you engaged in an
unincorporated trade or business in which
both personal services and capital were
material income-producing factors, a
reasonable amount of compensation for
your personal services will be considered
earned income. The amount treated as
earned income, however, may not be
more than 30% of your share of the net
profits from the trade or business after
subtracting the deduction for one-half of
self-employment tax.
If capital is not an income-producing
factor and personal services produced the
business income, the 30% rule does not
apply. Your entire gross income is earned
income.
Line 25. Enter the value of meals and/or
lodging provided by, or on behalf of, your
employer that is excludable from your
income under section 119. To be
excludable, the meals and lodging must
have been provided for your employer's
convenience and on your employer's
business premises. In addition, you must
have been required to accept the lodging
as a condition of your employment. If you
lived in a camp provided by, or on behalf
of, your employer, the camp may be
considered part of your employer's
business premises. See Exclusion of
Meals and Lodging in Pub. 54 for
details.
Part VI
Line 28. Enter the total reasonable
expenses paid or incurred during the tax
year by you, or on your behalf, for your
foreign housing and the housing of your
spouse and dependents if they lived with
you. You may also include the reasonable
expenses of a second foreign
household (defined below). Housing
expenses are considered reasonable to
the extent they are not lavish or
extravagant under the circumstances.
Housing expenses include rent, utilities
(other than telephone charges), real and
personal property insurance,
nonrefundable fees paid to obtain a lease,
rental of furniture and accessories,
residential parking, and household
repairs. You may also include the fair
rental value of housing provided by, or on
behalf of, your employer if you have not
excluded it on line 25.
Do not include deductible interest and
taxes, any amount deductible by a
tenant-stockholder in connection with
cooperative housing, the cost of buying or
improving a house, principal payments on
a mortgage, or depreciation on the house.
Also, do not include the cost of domestic
labor, pay television, or the cost of buying
furniture or accessories.
Include expenses for housing only
during periods for which:
The value of your housing is not
excluded from gross income under
section 119 (unless you maintained a
second foreign household as defined
below) and
You meet the tax home test and either
the bona fide residence or physical
presence test.
Second foreign household. If you
maintained a separate foreign household
for your spouse and dependents at a
place other than your tax home because
the living conditions at your tax home
were dangerous, unhealthful, or otherwise
adverse, you may include the expenses
of the second household on line 28.
Married couples. The following rules
apply if both you and your spouse qualify
for the tax benefits of Form 2555:
If you and your spouse lived in the
same foreign household and file a joint
return, you can figure your housing
amounts (line 31) either separately or
jointly. If you file separate returns, you
must figure your housing amounts
separately. In figuring your housing
amounts separately, you can allocate
your qualified housing expenses (line 28)
between yourselves in any proportion you
wish, but each spouse claiming a housing
amount must use his or her full base
amount housing amount (line 30). In
figuring your housing amount jointly,
either spouse (but not both) can claim the
housing exclusion or housing deduction.
However, if you and your spouse have
different periods of residence or presence
and the one with the shorter period of
residence or presence claims the
exclusion or deduction, you can claim as
-3-
215
housing expenses only the expenses for

that shorter period. The spouse claiming
the exclus1on or deduction may aggregate
the housing expenses of both spouses
and subtract his or her base housing
amount.
If you and your spouse lived in
separate foreign households, you each
may claim qualified expenses for your
own household only if:
1. Your tax homes were not within a
reasonable commuting distance of each
other and
2. Each spouse's household was not
within a reasonable commuting d1stance
of the other spouse's tax home.
Otherwise, only one spouse may claim
his or her housing exclusion or deduction.
This is true even if you and your spouse
file separate returns.
See Pub. 54 for additional information.
Line 29. Enter the number of days in
your qualifying period that fall within your
2003 tax year. Your qualifying period is
the period during which you meet the tax
home test and either the bona f1de
residence or the physical presence test.
Example. You establish a tax home
and bona fide residence in a fore1gn
country on August 14, 2003. You ma1nta1n
the tax home and residence until January
31, 2005. You are a calendar year
taxpayer. The number of days in your
qualifying period that fall within your 2003
tax year is 140 (August 14 through
December 31, 2003).
Nontaxable U.S. Government
allowances. If you or your spouse
received a nontaxable housing allowance
as a military or civilian employee of the
U.S. Government, see Pub. 54 for
information on how that allowance may
affect your housing exclusion or
deduction.
Line 32. Enter any amount your
employer paid or incurred on your behalf
that is foreign earned income included in
your gross income for the tax year
(without regard to section 911 ).
Examples of employer-prov1ded
amounts are:
Wages and salaries received from your
employer.
The fair market value of compensation
provided in kind (such as the fair rental
value of lodging provided by your
employer as long as it is not excluded on
line 25).
Rent paid by your employer directly to
your landlord.
Amounts paid by your employer to
reimburse you for housing expenses.
educational expenses of your
dependents, or as part of a tax
equalization plan.
Self-employed individuals. If all of your
foreign earned income (Part IV) is
self-employment income, skip lines 32
and 33 and enter zero on line 34. If you
qualify, be sure to complete Part IX.
53
Part VII
Married couples. If both you and your
spouse qualify for, and choose tocla1m,
the foreign earned income exclus1on, the
amount of the exclusion is figured
separately for each of you. You each
must complete Part VII of your separate
Forms 2555.
Community income. The amount of the
exclusion is not affected by the
income-splitting provisions of community
property laws. The sum of the amounts
figured separately for each of you IS the
total amount excluded on a joint return.
Part VIII
If you claim either of the exclusions, you
may not claim any deduction (mclud1ng
moving expenses), credit, or exclus1on
that is definitely related to the excluded
income. If only part of your foreign earned
income is excluded, you must prorate
such items based on the ratio that your
excludable earned income bears to your
total foreign earned income. See Pub. 54
for details on how to figure the amount
allocable to the excluded income.
The exclusion under section 119 and
the housing deduction are not considered
definitely related to the excluded 1ncome.
Line 42. Report in full on Form 1040 and
related forms and schedules all
deductions allowed in figuring your
adjusted gross income (Form 1 040, line
34). Enter on line 42 the total amount of
those deductions (such as the deduction

for moving expenses, the deduction for
one-half of self-employment tax, and the
expenses claimed on Schedule C or C-EZ
(Form 1040)) that are not allowed
because they are allocable to the
excluded income. This applies only to
deductions definitely related to the
excluded earned income. See Pub. 54 for
details on how to report your itemized
deductions (such as unreimbursed
employee business expenses) that are
allocable to the excluded income.
IRA deduction. The IRA deduction is not
definitely related to the excluded income.
However, special rules apply 1n f1gunng
the amount of your IRA deduction. For
details. see Pub. 590, Individual
Retirement Arrangements (IRAs).
Foreign taxes. You may not take a credit
or deduction for foreign income taxes paid
or accrued on income that is excluded
under either of the exclusions.
If all of your foreign earned income is
excluded, you may not claim a credit or
deduction for the foreign taxes paid or
accrued on that income.
If only part of your income is excl~ded.
you may not claim a credit or deduct1on
for the foreign taxes allocable to the .
excluded income. See Pub. 514, Fore1gn
Tax Credit for Individuals, for details on
how to figure the amount allocable to the
excluded income.
Housing Deduction Carryover Worksheet-Line 47

Keep for Your Records
Enter the amount from your 2002 Form 2555, line 44 .......... .
1.-----
2 Enter the amount from your 2002 Form 2555. line 46 .......... .
2.-----
3 Subtract line 2 from line 1. If the result is zero, stop; enter -0- on nne
47 of your 2003 Form 2555. You do not have any hous1ng deductJon
carryover from 2002 . . . . . . . . . . . . .
. .........
3.-----
4 Enter the amount from your 2003 Form 2555, nne 45 .......... .
5 Enter the amount from your 2003 Form 2555, line 46 .......... .
4.----5.
6 Subtract line 5 from nne 4 ............................. .
6. _ _ __
7 Enter the smaller of nne 3 or line 6 here and on line 47 of your 2003
Form 2555. If line 3 is more than line 6, you may not carry the
difference over to any future tax year . . . . . . . . . . . . . . . . . . . . . . ..,._ 7.
-4-
Printed on recycled paper
216
Part IX
If line 31 is more than line 34 and line 27
is more than line 41, complete this part to
figure your housing deduction. Also, .
complete this part to figure your hous1ng
deduction carryover from 2002.
One-year carryover. If the amount on
line 44 is more than the amount on line
45, you may carry the difference over to
your 2004 tax year. If you cannot deduct
the excess in 2004 because of the 2004
limit, you may not carry it over to any
future tax year.
Paperwork Reduction Act Notice. We

ask for the information on this form to
carry out the Internal Revenue laws of the
United States. You are required to give us
the information. We need it to ensure that
you are complying with these laws and to
allow us to figure and collect the nght
amount of tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMS
control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section 6103.
The time needed to complete and file
this form will vary depending on individual
circumstances. The estimated average
time is:
Recordkeeping ...... .
Learning about the law
or the form .....
Preparing the form ....
Copying, assembling,
and sending the form to
the IRS ............ .
1 hr., 52 min.
26 m1n.
1 hr .. 47 min.
49 min.
If you have comments concerning the

accuracy of these time estimates or
suggestions for making this form simpler.
we would be happy to hear from you. See
the Instructions for Form 1040.
5~
~~ Department of the Treasury
~ INTERNAl REVENUE SERVICE
Top
of page 1
Form 1040
Bottom
of page 2
Form 1040
217
IncoiDe Tax Forms
A Special Message
From The Commissioner
Please give this a few moments of your time
We know that filling out a tax return is not fun - even if you get a
refund, which most taxpayers do. Yet, we believe most American taxpayers
can make their own tax return for 1971 .
1971
Turn this page and you will find an example showing how almost 30 million
of you can prepare your tax return. There is no reason for anyone in this large
group to pay to have his return prepared by someone else-unless he has
some complicated personal situation.
Instructions
for
Form 1040
If your income is less than $10,000 and you use the tax table with the built
in standard deduction, as you will see from the next page, making your tax
return for 1971 should not be difficult. If you prefer, we'll even compute the
tax for you when you mail your return to one of our service centers. And we
will do this even if your income goes up to $20,000. If you are entitled to a
retirement income credit, we will figure that too. You will find further instructions on all of this on page 3.
and for Schedules
A,B,C,D,E,F
and R
If you have made heavy payments of charitable contributions, interest medical

expenses (unreimbursed), and taxes, it may pay you to itemize your deductions instead of taking the standard deduction. In such case, while we cannot
make the computations for you, your local Internal Revenue Office stands
ready to help you by answering your questions. In addition, the Service will
supply informational pamphlets and help in other ways. This service is free.
If nevertheless you need to employ someone to help you because of personal complications, you should remember that you still are responsible for
everything on your return. Therefore, be careful and satisfy yourself that you
employ someone who is competent and trustworthy, and who will not misuse
the confidential information you furnish for use in making your return.
Department
of the
Treasury
fit
Internal
Revenue
Service
Each year American taxpayers voluntarily file their tax returns and
make a special effort to pay the taxes they owe. This is a real compliment to
our American system. As Commissioner, we commend and thank you for
your wonderful cooperation and support. We pledge to you a vigorous enforcement of your internal revenue laws against the very fe.w who would attempt to cheat the system. The honest American taxpayer deserves no less.
A final word: Some taxpayers may not have had enough tax withheld from
their salaries or wages during 1971. Because of this, we recommend that you
prepare your return early. Then, if you find your tax was not fully paid by the
amount withheld, you will have time-before April 17-to meet your tax obligation.
~---~- t ()j~
Commissioner of Internal Revenue
218
1979 Annual Report

to the U.S. Congress
his year I'm pleased to report that a number of

organizational changes have been implemented
and appear to be accomplishing the intended
goals. The changes were undertaken last year to
implement recommendations made in a study conducted
by senior IRS career executives.
The change most directly affecting taxpayers was the
modification of our administrative appeals procedure by
consolidating the former two levels of appeal into a single
appeal structure at the regional level. This system is
now fully in effect and is resulting in the more expeditious
handling of controversies at less expense to both taxpayer
and the IRS. We continue to hold appeals conferences
at all locations where district conferences were formerly
held with the results that taxpayers have conveniently
available to them a regional appeals officer with full
settlement authority.
We believe the change in settlement procedures of
docketed Tax Court cases is working effectively to utilize
our resources better and to promote a more orderly
procedure for handling the increasing volume of docketed
cases.
The streamlining of our smallest districts has been
accomplished smoothly. We are realizing savings at no
loss of service to taxpayers.
Separating functions involving service to the public from
those involving compliance has increased our emphasis
on taxpayer service as well as permitted better integration
of our collection activities with related compliance
functions.
Notwithstanding our increased emphasis on taxpayer
problems, it seems clear that some of these will continue
to "slip through the cracks." If this occurs in even a very
small percentage of the huge number of matters we
handle the number of such cases will be large. To
address this problem we instituted our problem resolution
program (PRP) on an experimental basis in 1977 to
provide a separate function to handle persistent taxpayer
problems -- those not satisfactorily resolved through
normal channels. PRP is now fully operational in all of
our 58 district and 10 service centers with problem
resolution officers who have the ability and know-how to
cut through red tape quickly on behalf of taxpayers. About
72,000 taxpayer problems were successfully resolved
through this procedure in 1978 and a number of systems
219
Commissioner of
Internal Revenue
changes identified by this problem have been made to
improve the IRS efficiency and responsiveness.
A sample follow-up with taxpayers whose problems were
handled through PRP found a high degree of satisfaction,
but I will not be satisfied as long as some taxpayer
complaints and problems persist. Therefore, as the year
ended we were planning to set up an ombudsman-like
position in my immediate office to have broad authority
over PAP and to serve as an advocate for taxpayers.
Our forms and instructions are a matter of continuing
concern. The challenge of presenting and explaining a
complex law in an understandable way is formidable and
we devote substantial effort to this problem. In addition
to our normal work in this area we have formed a highlevel task force to consider longer-range possibilities. We
have engaged a private firm to review all the individual
tax return forms, schedules and instructions and to make
recommendations for redesign and rewriting. This effort
should be completed in the fall of 1980 when we will start
evaluating and testing any recommended alternatives.
While it is important that we constantly look for ways of
simplifying the burden of reporting, frequent changes
should be avoided. There is great value in taxpayer's
familiarity with our forms. I'm, therefore, pleased that the
1979 forms follow the 1978 forms except for a few
changes required by new legislation.
There is no doubt that better taxpayer assistance, more

sensitive responsiveness to taxpayer complaints and
problems and simpler tax forms and instructions are of
great importance in achieving a high level of voluntary
:>compliance with our tax laws. But our enforcement
efforts also are crucial. Any significant noncompliance
is a matter of deep concern to the IRS, Congress and the
taxpaying public. Beyond the tax revenues lost when
income is not reported is the basic question of fairness
!>to taxpayers who voluntarily obey the laws.
Since the mid-Sixties the IRS has regularly measured
compliance on filed returns through its taxpayer
compliance measurement program (TCMP). As an
adjunct to our audit program, TCMP is an effective tool
to measure the unreported income detectable by normal
audit procedures and to develop the computer formulas
used to identify returns for audit. It does not, however,
measure the unreported income to those who fail to file
returns nor certain types of income not readily detectable
Doesn't it seem strange that the IRS uses the word "voluntary" six times in the introduction
to their own Annual Report but does not use the term once in your Privacy Act Notice?
by normal audit procedures, such as income from illegal
sources.
In 1981, I appointed a study group to prepare estimates
of unreported income. The group's report, "Estimates of
Income Unreported on Individual Income Tax Returns,"
was released on August 1979. This report, using data
forthe 1976 tax year, marks our first effort to measure
unreported individual income.
The report estimates that individuals failed to report $75
billion to $1 00 billion in income from legal activities, with
a resulting revenue loss of $13 billion to $17 billion.
Unreported income from certain illegal sources -narcotics, illegal gambling and prostitution -- was
estimated to be between $25 billion and $35 billion, and
cost the government approximately $6 billion to $9 billion
in lost tax revenues.
To put there figures in context, in the same tax year
~individuals voluntarily reported nearly $1.1 trillion
in income and paid a total of $142 billion in income taxes.

The report lends considerable weight to conclusions
drawn from past TCMP studies that voluntary
~reporting is highest when incomes are subject to tax
withholding. Incomes subject to information reporting
show a lower compliance level but still much higher than
incomes subject to neither withholding nor information
reporting.
In fairness to the millions of taxpayers who voluntarily
~file, report all their income and pay the tax due, we must
strengthen current compliance efforts and, where called
for, plan innovative actions to find and tax unreported
income.
A Treasury legislative proposal, currently under
consideration by Congress, to withhold taxes from certain
independent contractors would be a major step in dealing
with one area of low compliance.
Our program to match information documents filed by
payers of wages, dividends, interest and certain other
payment with income tax returns has become an
increasingly important tool to identify cases of
underreporting of income and nonfiling of returns. The
number of documents matched has been increasing
substantially and with the full implementation of the
combined annual wage reporting system will reach 400
220
million or about 80 percent of the total filed.

Our document matching activity has been separate from
our examination program and has not affected the
selection of returns for audit or their actual audit.
However, in the next filing season, a printout of the
information documents processed will be associated with
returns selected for the examination program so that the
information will be available to tax return classifiers and
to return examiners. Since these documents will also be
used during TCMP audits, the accuracy of the results of
that program should also be improved.
In last year's report I noted our increasing concern about
the use of abusive tax shelters -- those which take
positions beyond a reasonable interpretation of the law - and our increased audit effort in this area. As a result
of that effort we have, at various stages of the examination
and appeals process, about 200,000 tax returns involving
about $4.5 billion of questionable deductions. This
program requires a substantial commitment of resources
but it is commitment we will continue to make, and even
increase if necessary. The great abuse we are finding in
this area, if allowed to continue unchecked, could result
in a serious decline in taxpayer's perception of the
fairness and evenhandedness of our administration of
the tax system and consequently in the voluntary
~compliance.
Many abusive tax shelters depend for their successful
marketing on the participation of professional tax advisors.
We intend to continue an exploration, begun this year,
into the ethical and legal standards that should govern
such participation.
Tax administration today calls for us to increase our
abilities to serve the majority of taxpayers who comply
with the law. A crucial aspect of this service is to enforce
the law vigorously against the few who attempt to subvert
it. We believe this year's report reflects that commitment.
~CIJ
Jerome Kurtz
602.101
<Sec. 7805 o! the Internal Revenue Code ot
1954 C68A Stat. 917; 26 U.S.C. 7805})
[T.D. 8011, 50 FR 10222, Mar. 14, 1985, as
amended at 51 FR 7442, Mar. 4, 1986. Redes
1gnated at 53 FR 19187, May 26, 19881
Subpart J-OMB Control Numben

Under the Paperwork Reduction
Act
601.9000 OMB control numbers for the

statement of procedural rules.
<a> Purpose. This section collects and

to Internal Revenue Service collections of information in the Statement
of Procedural Rules <26 CF'R Part 601>
by the Office of Management and
Budget <OMB> under the Paperwork
Reduction Act of 1980. The Internal
Revenue Service intends that this section <together with 26 CF'R Part 602>
comply with the requirements of
1320.7<!>, 1320.12,
1320.13, and
1320.14 of 5 CFR Part 1320 <OMB regulations implementing the Paperwork
Reduction Act of 1980> for the display
of control numbers assigned by OMB
to collections of information of the Internal Revenue Service in the Statement of Procedural Rules. This section does not display control numbers
assigned by O:MB to collections of information of the Bureau of Alcohol,
Tobacco, and Firearms in the Statement of Procedural Rule$.
<b> Cross-reference. For display of
control numbers assigned by the
Office of Management and Budget to
collections of information of the Internal Revenue Service in regulations
elsewhere than in the Statement of
Procedural Rules, see 26 CFR Part
602.
<c> Display.
26 CFR 601 section where identified and
described
Current
OMB
control
number
602.101
OMB control numbers.
<a> Purpose. This part collects and

to collections of information in Internal Revenue Service regulations by
the Office of Management and Budget
<OMB> under the Paperwork Reduction Act of 1980. The Internal Revenue Service intends that this part <together with 26 CFR 601.9000> comply
with the requirements of 1320.7(f>,
1320.12, 1320.13. and 1320.14 of 5 CFR
part 1320 <OMB regulations implementing the Paperwork Reduction
Act>, for the display of control numbers assigned by OMB to collections of
information in Internal Revenue Service regulations. This part does not display control numbers assigned by the
Office of Management and Budget to.
collections of information of the
Bureau of Alcohol, Tobacco, and Firearms.
<b> Cross-reference. For display of
control numbers assigned by the
Office of Management and Budget to
Internal Revenue Service collections
of information in the Statement of
Procedural Rules <26 CFR part 601>,
see 26 CFR 601.9000.
(C)
60 1. 105(e) ..................,........................................... 1545-0091

601.201(e).............................................................. 1545-0819
601.201(i)............................................................... 1545-0819
601.201(j)............................................................... 1545-0019
601.201(n).............................................................. 1545-0019
601.201(0).............................................................. 1545-0019
601.401 1545-0257
601.401 .... _........................................................... 1545-0023
601.402 (c) and (d)............................................... 1545-0257
601.402(8).............................................................. 1545-0014
601.403 .................................................................. 1545-0257
601.403(c) .............................................................. 1545-0023
601.403(d).............................................................. 1545-0024
601.404 (d) and (f)............................................... 1545-0012
601.504.................................................................. 1545-0150
601.601 1545-0800
601. 702(f)(2) 1545-0429
221
PART 602-0MB CONTROL NUMBERS

UNDER THE PAPERWORK REDUCTION ACT
Display.
26 CFR part or section where identified and

described
1.1-1 .................................................................. .
1.25-1T ............................................................. .
1.25-2T ............................................................. .
1.25-3T ............................................................. .
1.25-4T ............................................................. .
125-5T ............................................................. .
1.25-6T ............................................................. .
1.25-7T ............................................................. .
1.25-ST ............................................................. .
1.28-1 ............................................................... .
1.31-2(a) ........................................................... .
1.37-1(c) ........................................................... .
1.37-3(b) ........................................................... .
1.41-4A(b) and (c) ........................................... .
1.42-1T ............................................................. .
175
Current OMB
control
number
1545-0067
1545-0922
1545-0922
1545-0922
1545-0922
1545-0922
1545-0922
1545-0922
1545-0922
1545-0619
1545-0074
1545-007'4
1545-0074
1545-0074
1545-0988
Appendix C
Treasury Decision 2313
Reader's Notes:
Treasury Decisions
Under Internal Revenue Laws

of the United States
Vol. 18
January-December 1916
W. G. McAdoo
Secretary of the Treasury
222
Washington
Government Printing Office
1917
(T.D. 2313)
Income Tax
Taxability of interest from bonds and dividends on stock of domestic corporations
owned by nonresident aliens, and the liabilities of nonresident aliens under
section 2 of the act of October 3, 1913.
Treasury Departme~:
Office of Commissioner of Internal Revenue
Washington D.C., March 21, 1916
To collectors of internal revenue:
Under the decision of the Supreme Court of the United States in the case of
Brushaber v. Union Pacific Railway [sic] Co., decided January 24, 1916, it is
hereby held that income accruing to nonresident aliens in the form of interest
from the bonds and dividends on the stock of domestic corporations is subject to
the income tax imposed by the act of October 3, 1913.
Nonresident aliens are not entitled to the specific exemption designated in
paragraph C of the income-tax law, but are liable for the normal and additional
tax upon the entire net income "from all property owned, and of every business,
trade, or profession carried on in the United States," computed upon the basis
prescribed in the law.
The responsible heads, agents, or representatives of nonresident aliens,
who are in charge of the property owned or business carried on within the United
States, shall make a full and complete return of the income therefrom on Form
1040, revised, and shall pay any and all tax, normal and additional, assessed
upon the income received by them in behalf of their nonresident alien principals.
The person, firm, company, copartnership, corporation, joint-stock company,
or association, and insurance company in the United States, citizen or resident
alien, in whatever capacity acting, having the control, receipt, disposal, or
payment of fixed or determinable annual or periodic gains, profits, and income of
whatever kind, to a nonresident alien, under any contract or otherwise, which
payment shall represent income of a nonresident alien from the exercise of any
trade or profession within the United States, shall deduct and withhold from such
annual or periodic gains, profits, and income, regardless of amount, and pay to
the officer of the United States Government authorized to receive the same such
sum as will be sufficient to pay the normal tax of 1 per cent imposed by law, and
shall make an annual return on Form 1042.
The normal tax shall be withheld at the source from income accrued to
nonresident aliens from corporate obligations and shall be returned and paid to
the Government by debtor corporations and withholding agents as in the case of
citizens and resident aliens, but without benefit of the specific exemption
223
designated in paragraph C of the law.

Form 1008, revised, claiming the benefit of such deductions as may be
applicable to income arising within the Oni ted States and for refund of excess
tax withheld, as provided by paragraphs B and P of the income-tax law, may be
filed by nonresident aliens, their agents or representatives, with the debtor
corporation, withholding agent, or collector of internal revenue for the district
in which the withholding return is required to be made.
That part of paragraph E of the law which provides that "if such person * *
* is absent from the Onited States, * * * the return and application may be made
for him or her by the person required to withhold and pay the tax * * *" is held
to be applicable to the return and application on Form 1008, revised, of
nonresident aliens.
A fiduciary acting in the capacity of trustee, executor, or administrator,
when there is only one beneficiary and that beneficiary a nonresident alien,
shall render a return on Form 1040, revised;
but when there are two or more
beneficiaries, one or all of whom are nonresident aliens, the fiduciary shall
render a return on Form 1041, revised, and a personal return on Form 1040,
revised, for each nonresident alien beneficiary.
The liability, under the provisions of the law, to render personal returns,
on or before March 1 next succeeding the tax year, of annual net income accrued
to them from sources within the United States during the preceding calendar year,
attaches to nonresident aliens as in the case of returns required from citizens
and resident aliens.
Therefore, a return on Form 104 0, revised, is required
except in cases where the total tax liability has been or is to be satisfied at
the source by withholding or has been or is to be satisfied by personal return on
Form 104 0, revised, rendered in their behalf.
Returns shall be rendered to the
collector of internal revenue for the district in which a nonresident aliens
carries on his principal business within the Onited States or, in the absence of
a principal 'business within the United States and in all cases of doubt, the
collector of internal revenue at Baltimore, Md., in whose district Washington is
situated.
Nonresident aliens are held to be subject to the liabilities and
requirements of all administrative, special, and general provisions of law in
relation to the assessment, remission, collection, and refund of the income tax
imposed by the act of October 3, 1913, and collectors of internal revenue will
make collection of the tax by distraint, garnishment, execution, or other
appropriate process provided by law.
So much of T.D. 1976 as relates to ownership certificate 1004, T.D. 1977
(certificate Form 1060), 1988 (certificate Form 1060), T. D. 2017 (nontaxabili ty
of interest from bonds and dividends on stock), T.D. 2030 (certificate Form
1071), T.D. 2162 (nontaxability of interest from bonds and dividends on stock)
and all rulings heretofore made which are in conflict herewith are hereby
superseded and repealed.
This decision will be held effective as of January 1, 1916.
W. H. Osborn
Byron R. Newton,
Acting Secretary of the Treasury
Approved, March 30, 1916:
224
INTERNAL REVENUE INVESTIGATION
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITIEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
EIGHTY-THIRD CONGRESS
FIRST SESSION
ON
ADMINISTRATION OF THE INTERNAL REVENUE LAWS
:j
I
I
PART A
FEBRUARY 3, 4, 5, 6, 9, 10, 25, 26, 27, MARCH 2, 3, 4, 5, 6, 10, 11, 12, AND
13, 1933
Printed for the use of the Committee on Ways and Means
UNITED STATES
GOVERNMENT PRINTING OFFICE
W ASIITNGTON: 1953
29091
225
CONTENTS
Testimony of-
page
~Av~e~=~:~ ~-. h~~~. ~-~~~~ol. ~~~ -~~~~~~~ -~~ ~i~i~~: ~-~r.e~.u ;r/~~e;n:~9 . 533 , 577
Beman, Raymond A., Seattle, Wash .......................................... 555
Campbell, E. Riley, head, Penal Division, Bureau oflnternal Revenue ............... 137
Farrell, Fred C.. assistant district commissioner. Alcohol and Tobacco Tax Division.
Bureau of Internal Revenue. Louisville, Ky .................................. 569
. 137
Grigsby, Earl G .. head. Permissive Branch, Bureau of Internal Revenue. . . . . .
Hearington. W.D., former district supervisor, Alcohol Tax Unit, Atlanta, Ga .......... 291
Huntington, John L., head, Basic Permit and Trade Practice Branch, Alcohol and
Tobacco Tax Division, Bureau oflntemal Revenue ...................... 2. 31. 137
Kinnaird, William H., Louisville, Ky .......................................... 551
Koehler, Earle E., head, Enforcement Branch Alcohol and Tobacco Tax Division,
Bureau of Internal Revenue .............................................. 469
Lieberman, Harry, examiner, Bureau oflnternal Revenue ......................... 137
Malmesbury. Charles H., internal revenue agent, Philadelphia district ..............50, 65
Maisie, Willard G., head, enforcement section, Philadelphia district, Alcohol and
Tobacco Tax Division, Bureau of Internal Revenue ........................... 447
McGinnity, John J., customs agent, Bureau of Customs ............................ 93
McPherson, Samuel 0., New Orleans, La...................................... 233
McQuown, Carleton R., special investigator, Alcohol and Tobacco Tax Division,
Atlanta, Ga. . ......................................................... 275
12
INTERNAL REVENUE INVESTIGATION
... Mr. CURTIS. I have one more question. What type of alcohol and liquor tax problem would be
referred to the Bureau oflnternal Revenue generally, and not be confined to and finally disposed of
in the Alcohol and Tobacco Tax Division?
Mr. A VIS. I do not believe there is any.
One of my assistants refers to policy and personnel, and of course, under this new structure, we
are concerned here in Washington, as I pointed out, largely with policy and in administering the
industry, rather than directing the personnel. That is left primarily to the district commissioners or,
rather, the assistant district commissioners.
Mr. CURTIS. An alcohol tax matter that would go to the Appeals Section Mr. A VIS. There is just no such thing. That is where this structure differs.
~
Let me point this out now: Your income tax is 100 percent voluntary tax, and your liguor
"WW tax is 100 percent enforced tax. Now, the situation is as different as nieht and day. Consequently. your same rules just will not apply, and therefore the alcohol and tobacco tax has been
handled here in this reorganization a little differently, because of the very nature of it, than the rest
of the over-all tax problem ...
226
lniustice
Research
Services
MISSION
The purpose of the IRS is to assist individuals who
want to legally reduce or avoid taxes that are not
lawfully required by law, in a manner that warrants the
highest degree of confidence in our integrity, honesty
and efficiency. To achieve that purpose, we will:
Assist individuals, through self-education, who want to
understand their legal rights and responsibilities about tax laws;
Stimulate compliance with all tax laws and regulations for which
there is a legal liability;
Encourage understanding of the term "voluntary compliance"
and offer lawful and prudent alternatives;
Provide pertinent assistance to individuals who seek to obtain the
necessary legal and professional counsel so they can understand
and comply with any, or all, tax laws that pertain to them;
Constantly search for and implement new, more efficient and
effective ways of accomplishing our Mission.
Internal Revenue
May 5, 1986
Bulletin No. 1986-18
Highlights
of this Issue
These synopses are intended only as aids to
the reader in indentifying the subject matter
covered. They may not be relied upon as
authoritative interpretations.
Mission of the Service
INCOME TAX
LR-189-84, page 4
Proposed amendments to the regulations relate to debt
instruments with original issue discount, to imputed
interest or deferred payment sales or exchanges of
property, and to safe haven interest rates for commonly
controlled taxpayers.
The purpose of the Internal Revenue Service is to collect the proper amount of tax
revenues at the least cost to the public, and
in a manner that warrants the highest degree of public confidence in our integrity,
efficiency and fairness. To achieve that
purpose, we will:
-- Encourage and achieve that highest
possible degree of voluntary compliance
in accordance with the tax law and regulations;
-- Advise the public of their rights and
responsibilities;
-- Determine the extent of compliance
and the causes of noncompliance;
-- Do all things needed for the proper
administration and enforcement of the tax
laws;
Findings Lists begin on page 85.

Announcement of Disbarments and Suspensions begin of page 81.
Announcement of Notice of Proposed Rulemaking on page 83.
Monthly Index for April begins on page 88.
~~ Department of the Treasury
~ Internal Revenue Service
-- Continually search for an implement

new, more efficient and effective ways of
accomplishing our Mission.
228
Notices
This section of the FEDERAL REGISTER contains documents other than rules or proposed rules that are applicable to the pubhc. Notices of hearings and
investigations. committee meetings. agency decisions and rulings. delegations of authority. filing of petitions and applications and agency statements of
organizations and functions are examples of documents appearing in this section.
DEPARTMENT OF THE TREASURY

ORGANIZATION AND FUNCTION
This material supersedes the statements on
organization and functions published at 37
FR. 20961-20990. 38 FR 23341 and 23342.
and 38 FR 30011 and 30012.
Dared: March 25, 1974.
JSE.'\LI
DO~ALD C ALE.\:A)'."DER
Commissioner of Internal Rc\'Cnuc
II 00 ORGANIZA TIO!'\ AND STAFFING

II I 0 ORGANlZA TIO!'\ AND FUNCTIONS
OF THE INTERNAL REVENUE SERVICE
SEC. Ill! Esrablislzment of the Jmcmal
Revenue Senice.
SEC. 1111.1 Mission.
~
The mission of the Senice is te> encour..,./ al!e and achieve the highest possible del!ree
e>f voluntan compliance with the tax laws
and regulations and to maintain the highest
degree of public confidence in the integrity
and efficiency of the SerYice. This includes
communicating the requirements of the law
to the public. determining the extent of compliance and causes of non-compliance, and
doing all things needful to a proper enforcement of the law.
SEC. 1111.2 Organic Act.
( l} The Office of the Commissioner oflnternal ReYenue was established by an act of
Congress ( l: Stat. 432) on July l, 1862. and
the First Commissioner of Internal ReYenue
took office on July 17, I 862.
(2) The act of July J provided:
" ... That. for the purpose of superintending the collection of internal duties, stamp
dues, licenses, or taxes imposed by this Act.
or which may be hereafter imposed, and of
assessing the same, an office is hereby created in the Treasury Department to be called
the Office of the Commissioner of the Internal Revenue ... Commissioner oflnternal Revenue ... shall be charged, and hereby is
charged, under the direction of the Secreta;:.
of the Treasury, with preparing all the instructions, regulations, directions, forms, blanks,
stamps, and licenses, and distributing the
same or any part thereof, and all other matters pertaining to the assessment and collection of the duties, stamp duties, licenses, and
taxes which may be necessary to carry this
Act into effect, and with the general superintendence of his office. as aforesaid, and shall
have authority, and hereby is authorized and
required, to provide proper and sufficient
stamps or dies for expressing and denoting
the several stamp duties. or the amount

thereof in the case of percentage duties, imposed by this Act. and to alter and renew or
replace such stamps from time to time, as
occasion shall require ... "
(3) By common parlance and understandmg. of the time. an office of the importance
of the Office of Commissioner of Internal
Re,enut> was a bureau. The Secretary of the
Treasury in his report at the close of the calendar year I 86:2 stated that "The Bureau of
Internal Revenue has been organized under
the Act of the last session ... " Also it can be
seen that Congress had intended to establish
a Bureau oflnternal Revenue, or thought they
had, from the act of March 3, 1863, in which
provision was made for the President to appoint with Senate confirmation a Deputy
Commissioner of Internal Revenue "who
shall be charged with such duties in the bureau of internal revenue as may be prescribed
by the Secretary of the Treasury, or as may
be required by l:~w. and who shall act as Cornmissioner of internal revenue in the absence
of that officer. and exercise the privilege of
franking all letters and documents pertaining to the office of internal revenue." In other
worlds. "the office of internal revenue" was
"the bureau of internal revenue." and the act
of July I. I 862 is the orgamc act of todays
Internal Revenue Service.
SEC. Ill 1.3 History.
SEC. 1111.31 Internal taxation.
Madison's Notes on the Constitutional
Convention revealed clearly that the framers
of the Constitution believed for sometime that
the principal, if not sole, support of the new
Federal Government would be derived from
customs duties and taxes connected with shipping and importations. Internal taxation
would not be resorted to except infrequently,
and for special reasons. The first resort to
internal taxation, the enactment of internal
revenue laws in 1791 and in the following
I 0 years, was occasioned by the exigencies
of the public credit. These First laws were
reenacted for the period 1813-1 817 when the
effects of the war of I 8 12 caused Congress
to resort to internal taxation. From 181 8 to
1861, however, the United States had no internal revenue laws and the Federal Government was supported by the revenue from
import duties and the proceeds from the sale
of public lands. In 1862 Congress once more
levied internal revenue taxes. This time the
establishment of an internal revenue system,
FEDERAL REGISTER, VOL. 39, NO 62-- FRIDAY. MARCH 29, 1974.
229
not exclusively dependent upon the supplies

of foreign commerce, was permanent.
SEC. J 111.32 Background and c1olurion
ofpresent organization.
(I) Before the establishment of the Office
of Commissioner of Internal Revenue. taxes
were collected by ''Supervisors" of collection districts who were appointed by the
Prestdent subject to Senate confirmation.
These Supenisors worked under the direct
control of the Treasury Department. The
Revenue Act of IS 13 provided, for the first
time. for a "Collector" and a "Principal Assessor'' for each collection district, and for
deputy collectors and assistant assessors.
Collectors and Assessors appear to be the
original forerunners for the twentieth century
Collectors of Internal Revenue and Internal
Revenue Agents in Charge.
(2) Since 1862, the Internal Revenue Service has undergone a period of steady growth
as the means for financing Government operations shifted from the )e\'ying of import
duties to internal taxation. Its expansion received considerable impetus in 1913 with the
ratification of the Sixteenth Amendment to
the Constitution under which Congress received constitutional authority to levy taxes
on the income of individuals and corporations. With the enactment of income tax laws
the work of the Revenue Senice began to
take on a highly technical character.
(3) From the World War I period through
1951. the basic organizational structure of the
Internal Revenue Senice remained essentially unchanged even though there were
marked increases in the number of taxpayers
seniced, revenue receipts, employees and the
overall workload. The Service was organized
in Washington and the field. on a program or
"type-of-tax" basis, with jurisdictionally
separate organizations or "Linits", charged
with the administration of different types of
taxes.
SEC. 1111.4 Reorganization Plan No. I
of2952 and other changes.
(I) On January 14, 1952, the President of
the United States submitted to Congress Reorganization Plan No. I of 1952, calling for
a comprehensive reorganization of the Internal Revenue Senice. On March 13, 1952,
the last motion to defeat the plan was voted
down in the Senate, and the Plan became effective on March 15, 1952.
(2) Reorganization Plan No. I of 1952
brought about four basic changes m the Internal Revenue Service:
(a) The organization of the Serv1cc along
functional lines-i.e., operations, administration, technical, planning. and inspection:

Director
Internal Revenue
Service Center
P.O. Box 9941, Ogden, Utah 84409

December 22, 1983
Western Region
Ogden, Utah
The Honorable Dennis DeConcini

United States Senate
Washington, D. C .
2 0 510
Dear Senator DeConcini:
This is in reply to your letter of November 29, which forwarded to
us a Letter from your constituent,
It is Internal Revenue Service policy not to respond to a letter of
the type written by
on a point-by-point basis,
since that approach only precipitates further endless questions.
These letters almost always reflect personal opinions and frustrations
with the tax system which the Service is unable to address.
~The mission of the Internal Revenue Service is to encourage and
~achieve the highest possible degree of voluntary compliance with
the tax laws and regulations and to conduct itself so as to.warrant
the highest degree of public confidence in its integrity and
efficiency. In accomplishing this mission, the Service strives to
help honest taxpayers solve their legitimate problems as effectively
as possible.
We do not, however, have sufficient resources to
address the perceived problems of those who are not engaged in an
honest search for answers. While tax collection is not a popular
function of government, it clearly is a necessary one, without
which all other functi~ns would eventually cease.
We have placed emphasis throughout the Service on the need to

safeguard taxpayers' rights, and will continue to do so.
The
~ success of our voluntary self-assessment system rests largely on
~taxpayers' perceptions that the Service is firm but fair in its
administration of the tax laws, and we will make every effort to see
that we deserve their confidence.
Sincerely,
Director
230
Department
of the
Treasury
INTERNAL
REVENUE
SERVICE
HANDBOOK FOR
SPECIAL AGENTS
CRIMINAL INVESTIGATION
INTELLIGENCE DIVISION
INTERNAL REVENUE
SERVICE
"AGENTS ... Our tax system is based on individual
self assessment and voluntary compliance ...
the material contained in this handbook is
confidential in character. It must not under any
circumstances be made available to persons outside
the service."
MR. MORTIMER CAPLIN
INTERNAL REVENUE SERVICE
COMMISSIONER
231
Chapter 300
General Investigative Procedure

310 (1-18-80)
Criminal Investigation Programs
9781
311 (5-9-80)
General
9781
(a) General Enforcement Program

{a) This program encompasses all criminal
enforcement activities of the Criminal Investigation
Division except those included in the special
enforcement program. The identification and
investigation of income tax evasion cases of substance
with prosecution potential is a primary objective. The
program also provides for balance coverage as to types
of violations, as well as geographic locations and
economic and vocational status of violators as
~ considered necessary to stimulate voluntary
..,./ compliance. (IRM 9152)
(b) The highest priority of the Criminal Investigation Division is to create maximum positive i m pact on
the compliance attitudes and practices of taxpayers
l
I
page 9781-88
(4-15-82)
~ (1) An individual taxpayer may refuse to exhibit his/

..,./ her books and records for examination on the ground
that compellino him/her to do so might violate his/her
right against self-incrimination under the Fifth
Amendment and constitute an illegal search and
seizure under the Fourth Amendment. [Boyd v. U.S.;
U.S. v. Vadnerj However. in the absence of such claims,
it is not error for a court to charge the jury that it may
consider the refusal to produce books and records, in
determining willfulness. [Louis C. Smnh v. U.S.; Beard
v. U.S.; Olson v. U.S.; Myres v. U.S.]
(2) The privilege against self-incrimination does not
permit a taxpayer to refuse to obey a summons issued
under IRC 7602 or a court order directing his/her
appearance. He/she is required to appear and cannot
use the Fifth Amendment as an excuse for failure to do
so, although he/she may exercise it in connection with
specific questions. [Landy v. U.S.] He/she cannot refuse
MT 9781-32
IR Manual
through an effective General Enforcement Program

GEP). Within the GEP Program, priority will be given to
high impact coordinated compliance projects. (IRM
9161.1)
(2) Special Enforcement Program
(a) This program encompasses the identification
and investigation of that segment of the public who
derive substantial income from illegal activities and
violate tax laws or other related statutes in contravention
of the Internal Revenue laws. The very nature of their
operations requires national coordination of enforcement
efforts, close cooperation and liaison with the
Department of Justice and other Federal, State and local
law enforcement agencies. (See IRM 9400 and IRM
9153).
(b) Criminal Investigation. through the Special
Enforcement Program. will continue to participate
actively in the Federal effort against persons who derive
substantial income from illegal activities and violate the
tax laws. (IRM 9161.2)
Handbook for Special Agents
342.12 (1-18-80)
Books and Records of An Individual
342.11
page 9781-35
(5-9-80)
232
to bring his/her records, but may decline to submit them

for inspection on constitutional grounds. In the Vadner
case. the government moved to hold a taxpayer in
contempt of court for refusal to obey a court order to
produce his/her books and records. He refused to
submit them for inspection by the Government, basing
his refusal on the Fifth Amendment. The court denied
the motion to hold him in contempt, holding that
disclosure of his assets would provide a starting point
for a tax evasion case.
(3) Where records are required to be kept as an aid
to enforcement of certain regulatory functions enacted
by Congress, such records have been held public
records, whose production may be compelled without
violating the Fifth Amendment. This reasoning has also
been applied in some income tax evasion cases.
[Falsone v. U.S.; Beard v. U.S.] Other income tax cases
have stated that compulsory production of a taxpayer's
books and records for use in a criminal prosecution
would violate the constitutional protection against selfincrimination. There has not yet been any Supreme
Court decision holding the public records doctrine
applicable in income tax cases.
THE LIBRARY OF CONGRESS

WASHINGTON, D.C. 20540
LAW LIBR.AR Y
AMERJCA~-BR1TISH
LA v, DIVISION
Dear Mr. Ramos:

This letter is in response to your request for
information concerning the legal significance of the zip code.
United States Postal Service handles, over 147 billion
pieces of mail each yeaY. As far as we can determine, the zip
codes were developed to facilitate the speed and accuracy of
handling the mail in oYder to provide a better service.
I am not
sure what the zip codes have to do with jurisdiction, except to
~pinpoint a particular area of the country.
Like paying taxes,
~usina zip codes is voluntary and it would not be illeaal not to
use them.
However, the result of not using zip codes would
probably be a thyee-day delay in the delivery of one's mail.
If
you have additional questions, you should direct them to the
Information, Regional Post Office, 850 Cherry Avenue, San Bruno,
California 94099.
Please let us know if we can be of further assistance.
SinceYely
Robert L. Nay
Assistant Chief
Mr. Richard s. Ramos

321 S. Westminster Avenue, 3204
Los Angeles, California,
90020
233
I
I
I
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___ Message: 8 Date: Tue, 25 Nov 2003 22:04:12-0600

FOR mE WESTERN DISTRICT OF TENNESSEE

TERRELL L. HARRIS, ESQ.

UNITED STATES AITORNEY

UNITED STATES OF AMERICA,

LOWELL H. BECRAFT, JR.

ROBERT G. BERNHOFT, ESQ.

DANIEL JOSEPH HAUGHTON

BY MR. BECRAFT: ....................... 341 13

BYMR.MURPHY: ........................ 312 17

BYMR.MURPHY: ........................ 345

BY MR. BECRAFT: ....................... 348

BYMR. MURPHY: ........................ 351

BYMR.MURPHY: ........................ 364

BY MR. BECRAFT: ....................... 367

BY MR. MURPHY: ........................ 334

BY MR. BECRAFT: ....................... 330 10

BY MR. MURPHY: ........................ 332

MARY ANN OSBORNE

BYMR.MURPHY: ........................ 369

BYMR. BECRAFT: ....................... 371

Notes to Taxpayer- 1996 271

Cert. of Lack of Record

BY MR. BECRAFT: ....................... 374 24

BY MR. MURPHY: ........................ 373

BYMR.MURPHY: ........................ 382

FedEx Direct Deposit Entry 8 17

1995 Form W-4

Mortgage Interest Summary 41

Mortgage Interest Payments 7 24

Application for Account

Tuesday, August 5, 2003, at 9:05 o'clock a.m., when and

where evidence was introduced and proceedings were had as

Paper Copy of Charts

THE COURT: All right We're ready, we'll

THE COURT: You can be seated. And, of coUISe,

THE CLERK: Do you and each of you solemnly

PRELIMINARY lNSlRUCTIONS BY THE COURT

PRELIMINARY lNSlRUCTIONS BY THE COURT

THE ruRY: I do.

owing to her by the United States of America for said

THE CLERK: You may be seated.

COURT SECURITY OFFICER: You are now the jury

2 calendar y= by failing to make an income tax return on

4 in the case, and rm going to take a few minutes to tell

3 or before Aprill5, 1998, as required by law, to any

5 you about your duties as jurors and give you some

5 to pay the Internal Revenue Service said income tax, and